toys r us critical analysis

1122 Words5 Pages
Toys R Us, Inc. had a decline in revenue for the second quarter with sales of $13.5 billion, down from $14 billion the year before. Its profit dropped to $38 million for the recent year, from $149 million a year earlier. Net sales were $2.4 billion, a decline of $175 million or 6.9% versus the prior year. Toys R Us, Inc. also had an operating loss of $46 million, compared to operating earnings of $43 million in the year earlier, a decrease of $89 million. Overall, Toys "R" Us reported a loss of $113 million, compared with a year-earlier loss of $36 million. This report will conduct a Situation Analysis for Toys R Us, Inc. of potential causes of company’s problems and will summarize the primary reasons for poor performance.
Revenue Were
…show more content…
Strong competition in the toy retailing business is a concern as strategies adopted by peers can impair the growth of the company. Toys R Us competes with a number of retailers, including other toy retailers, discounters, and catalog and internet businesses.
In recent times, price wars have been the most prominent of the competitive strategies. Especially during the holiday season, price wars in the toy retailing market become more intense. For instance, in October 2011, Wal-Mart announced layaway (a service where customers can purchase a product without paying the entire cost at once) on toys during the holiday season. This is the first time Wal-Mart announced this since 2006. In addition, Wal-Mart also cut prices on a number of toys during the holiday season. Also, Target has aggressively slashed prices on toys during holiday season to lure shoppers. Target slashed prices on a number of hot toys, undercutting Wal-Mart by nearly 19%. These price wars have been forcing Toys R Us to also adopt an aggressive pricing strategy to avoid customer loss. Furthermore, several non-specialist retailers have also increased the space for selling children and infant products. The entry of new players in the industry is also expected to further fuel the competition. The growing competition in the toys retailing industry can make Toys R Us results of operations more sensitive to the competitive pricing practices and effecting its profit

More about toys r us critical analysis

Get Access