Toys R Us plans price cuts

Toys R Us plans price cuts

Linda A. Johnson

Toys R Us plans price cuts

RETAIL: Company expects marketshare to grow as it competes with other chains.

TRENTON, N.J. — Toys R Us will cut prices on about 200 popular itemsto better compete with Wal-Mart and Target, whichsell those toys at cost or less to attract customers, the company’s top executive told shareholders at their annual meeting Wednesday.

The Paramus-based retailer of toys, children’s clothes and accessories also plans to resume featuring its talking-giraffe mascot, Geoffrey, in advertising targeting parents who grew up with the character.

It also will begin testing new business strategies as part of an effort to increase its toy market share, now about 17 percent, to 20 percent, as it nears the end of a costly restructuring and store remodeling plan that was partially responsible for losses in two of the last three quarters.

“Every year, we’re going to try to launch a new business concept to see if we can grow our business,” John Eyler, president and chief executive officer, told investors and analysts at the meeting in New York.

Toys R Us is the No. 2 U.S. toy seller, behind Wal-Mart Stores Inc.,but is No. 1 worldwide because 511 of its 1,604 stores are in other countries.

The first new concept, successfully tested in four Washington, D.C., area Giant supermarketslast summer, involves setting up mini- Toys R Us stores in grocery stores that are part of the Dutch Ahold supermarket conglomerate. That will be expanded to dozens more stores in a wider area this year.

“We think this has potential to grow to 1,500 to 2,000 stores,” Eyler said.

The second idea is to put mid-size stores combining the company’s biggest divisions — Toys R Us, KidsR Us and Babies R Us — in small markets where the company has no operations.

Those stores will be named “Geoffrey,” for the mascot. The first four will open this summer.

Eyler said that while its discount store competitors have long undercut Toys R Us’ prices on the most popular toys, usingadvertised sales to draw customers who also buy other items, pricing became much more competitive over the 2001 holidayseason. That left Toys “embarrassed” by the price gap between its stores and Wal-Mart and Target, he said.

That problem continued to dampen sales in the quarter endedMay 4, although Toys R Us toy sales increased about 5 percent in the last quarter and the company narrowed its quarterly loss for what is traditionally a slow period for toy sales.

Eyler said the company will be able to make up the pricecuts on the most popular toys because it makes higher profit margins on its growing stable of exclusive toys, which nowaccount for about 20 percent of sales. One example is the Animal Alley line of plush toys, barely two years old and already the top-selling brand in the world.

Thecompany has also slashed the number of different toys it carries from about 14,000 to 8,500 this year, allowing more shelf space for the bigger sellers. That enabledthe company to boost the percentage of its most popular products in stock from 64 percent a couple years ago to 95 percent now.

Eyler said layoffs of 1,900 employees due to closings of less- profitable stores or consolidation of Kids R Us and Toys R Us stores, announced in January, should improve earnings by $25 million this yearand by $45 million next year.

Copyright Copley Press Inc. 2002

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