Baby R Us Becomes a Star; Toys R Us is a Cash Cow
SOURCE: NY Times
Toys 'R' Us May Sell Global Toy Business
By REUTERS
Published: August 11, 2004
Filed at 6:23 p.m. ET
NEW YORK (Reuters) - Retailer Toys R Us Inc. (TOY.N), slammed by intense competition from discounters such as Wal-Mart, may sell its toy business and focus on its fast-growing Babies R Us unit, the company said Wednesday.
Toys R Us, whose shares fell 6 percent on the news but later recovered, said it plans to separate the ownership of its two businesses and is looking at many ways to accomplish this, including a spin-off of Babies R Us.thrive and build on its core market of supplying not just baby toys, but gear like bedding, furniture, strollers and clothes to expectant and new parents.
The toy business, which targets a much different customer, will face a dramatic cut in operating expenses and capital in an effort to boost its cash flow, the company said.
Prudential analyst Mark Rowan described the move as ``extremely positive'' and said one of the critical pieces to unlocking shareholder value in Toys R Us is separating its ``crown jewel, Babies R Us.''
Toys R Us has nearly 700 toy stores in the United States and about 600 abroad. Babies R Us, the largest baby product specialty store chain in the world, has 200 U.S. stores. The company already shut its Kids R Us and Imaginarium stores.
Toys R Us plans to take about $150 million in markdowns in the second quarter, mostly to liquidate some U.S. toy store inventory, and said will wait until the end of the holiday season to decide on store closures.
Analysts expect 100 to 200 toy stores will be closed.
``For them to say they're not making a decision on closing stores before holidays is surprising,'' said Seam McGowan, an analyst with Harris Nesbitt. ``Sure, it's before the holiday season, but after 2003, what more do we need to find out?''
The 2003 holiday season was brutal for toy retailers, with aggressive price cuts on hot items eating into profits.
TOYS AREN'T US
The company's toy operations have grappled with competition from big discounters....
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