Toys R Us has revealed its three key areas of focus will be enhancing mobile capabilities, investing in its Babies R Us business and reducing costs.
Other key initiatives will include transforming its online and in-store customer experience and launching two store prototypes later this year, one for the eponymous chain, the other for Babies R Us.
Chairman and chief executive Antonio Urcelay was at pains to stress that the cost-cutting measures would not entail a significant number of store closures, although he confirmed earlier reports that it had not renewed its lease on its Times Square flagship – at least, not yet.
Since the company introduced its ‘TRU Transformation’ strategy in 2013, it has managed to take significant cost out of the business.
In 2014, the business cut $100m (£67m), primarily from US selling, general and administrative expense and cost of goods, and an additional £50m (£33.5m) to $100m is expected to be achieved by the 2016 financial year. A further $50 to $75m (£50m) of potential savings have been identified at its international operations.
The turnaround strategy is already manifest in trading performance. Toys R Us swung to a net profit of $265m (£177.8m) in the fourth quarter, compared with a loss of $210m (£141m) in the corresponding period a year ago. Although it remained in the red for the year as a whole, the direction of travel is far more positive.
In terms of immediate priorities, the business will continue to invest in enhancing its US stores. Some 158 stores will be upgraded this year.
A new service model will also be introduced into Babies R Us stores to help first-time parents have a better shopping experience, along with expanded parenting classes. In addition, mobile devices will be rolled out to store associates, in recognition of the growing importance of this channel. Mobile has become the most important driver of ecommerce traffic, and 57% of Toys R Us US digital visits come from mobile or tablet devices.
The retailer has also appointed an external design business and “retail innovation consultant” to help formulate its new store prototypes, which will be applied to selected existing stores later this year. “We plan to learn from the pilots and will scale ideas that work well into our other stores,” said Hank Mullany, president, Toys R Us, US.
In terms of international growth, Southeast Asia and China remain the key areas of focus.
- Malcolm Pinkerton, research director, Planet Retail
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