TRU Announces Updates to Its Transformation Strategy
Toys “R” Us, Inc., (TRU) announced an update on its strategy to improve the company’s operational performance. Antonio Urcelay, chairman of the board and CEO, Toys “R” Us, Inc.; Hank Mullany, president, Toys “R” Us, U.S.; and Mike Short, executive vice-president and CFO, Toys “R” Us, Inc., delivered a comprehensive review of the company’s fiscal 2014 performance and discussed the next phase of its TRU Transformation Strategy at a gathering yesterday for investors, analysts, and media.
“A year ago, we introduced a new strategic plan, with initial efforts concentrated on strengthening the foundation of the company so revenue and profits can grow in the future,” Urcelay said. “During 2014, we made steady progress in implementing this plan, successfully delivering on our commitment to slow sales decline, stabilize cash flow, and improve EBITDA. We also made significant process and organizational improvements, addressing a number of important executional issues. As a result, during the year, global internet sales continued to grow, benefitting from our strengthened omni-channel fulfillment model, U.S. margin improved due to disciplined promotional activity and inventory management, and customer satisfaction metrics confirmed that changes we have been making provided a better shopping experience in-store and online. During the year, we also grew our international presence, strengthened our leadership team, and formalized a global approach to doing business. Still, we know there is far more work to be done.”
During 2015, the objective of the TRU Transformation Strategy will focus on four key priorities:
• Continue to transform the customer experience in-store and online
Additional stores have been identified for investments in physical improvements. The elevated maintenance and lighting standards introduced last year will continue in all stores. The company is also placing a renewed focus on its Babies “R” Us business. Consumer insights will help guide TRU in making service and selling improvements, and a deeper integration with its loyalty program will be concentrated on driving more special-occasion visits year-round.
• Optimize the e-commerce business
Now with a more than $1.2 billion global e-commerce business, TRU’s focus is to continue to grow profitably online. An end-to-end assessment of the online business is underway to identify key areas for functionality and process improvements. TRU plans to further strengthen its omni-channel capabilities, including in-store pickup and ship-from-store execution, especially during the peak holiday season. Mobile growth has rapidly become the most important driver of its e-commerce traffic with 57 percent of TRU U.S. digital visits coming from a mobile or tablet device. TRU plans to work quickly to advance its mobile capabilities.
• Grow internationally and leverage global scale to drive category leadership and differentiation
TRU has a strong international presence across 36 countries. It plans to grow particularly in China and Southeast Asia. It will also fully leverage its scale and worldwide presence to deliver a coordinated and strategic approach to key merchandising decisions.
• Right-size the cost structure and design a more efficient, streamlined organization
As part of its Fit for Growth initiative, TRU continues to seek substantial cost- and working-capital savings opportunities. Last year, TRU identified potential cost savings of $150–$200 million primarily in U.S. SG&A and cost of goods. Over $100 million of this was achieved in fiscal 2014 and the additional $50–$100 million is expected to be fully realized by fiscal 2016. In addition, TRU recently identified $50–$75 million of potential savings in its international operations, which it expects to achieve by the end of fiscal 2016.
As part of this initiative, organizational changes and cost-cutting measures are currently underway globally including the following:
• TRU will outsource certain elements of its Operations Accounting and Fixed Assets functions in the U.S. and Canada to a third-party provider.
• In order to achieve greater efficiencies in Europe, TRU is moving from a decentralized country-by-country leadership structure to a more centralized pan-European approach. In doing so, a new European Management Board will assume overall responsibility across the continent. New management boards in each country will handle all local issues. The members of the Country Board, which include operations, finance, buying, and marketing roles, will report directly into the functional leadership members of the European Management Board.
• Since the beginning of 2015, TRU has closed approximately a dozen stores in the U.S., primarily due to lease expirations. TRU has no plans at this time to close a significant number of stores during the balance of the year. The company continues to open stores in China and Southeast Asia where rapid growth continues.
• There is no near-term debt. TRU recently completed the successful refinancing of $1.4 billion of its near-term debt maturities. It now has no significant outstanding debt repayments due until 2017.
Piping Hot Joins Saban Brands Portfolio
Saban Brands (SB) announced that it has added the iconic Australian surf brand, Piping Hot, to its growing portfolio of fashion and lifestyle brands. Piping Hot joins Saban Brands Lifestyle Group (SBLG), which currently includes Paul Frank, Macbeth, and most recently, Mambo.
Established in 1975 in Torquay on Victoria’s surf coast, Piping Hot provides products for those immersed in the surf lifestyle. In the 1970s, Piping Hot developed innovative products by using technical advancements in surfboards and wetsuits, according to Saban.
For the past 18 years, Piping Hot has had a relationship with Target Australia. The brand’s retail partnership with Target Australia has allowed Piping Hot to reach a broader market and expand its product range from surfboards into multiple categories including swimwear, footwear, beach towels, headwear, and more.
“Piping Hot is an authentic Australian brand that serves as a destination for cool, accessible, and on-trend surfwear,” said Elie Dekel, president of Saban Brands. “This new acquisition supports our growth strategy in the Asia-Pacific region and will drive expansion of the Piping Hot brand and our overall business worldwide.”
WWE, Tapout in Joint Venture
WWE and Authentic Brands Group, LLC announced a joint venture for Tapout, a newly repositioned fitness lifestyle brand. Tapout is now the official fitness and training partner of WWE and will be integrated across WWE’s global platforms including TV programming, WWE Network, pay-per-view broadcasts, live events, digital, and social media.
As part of this strategic partnership, WWE will create new content featuring its Superstars and Divas in Tapout apparel and market the brand across all platforms. Tapout branding will also be featured at the WWE Performance Center in Orlando and all performers, trainers, and staff will be outfitted in Tapout workout apparel. Tapout was Authentic Brand Group’s first acquisition.