Toys R Us, the iconic toy retailer, has faced significant challenges in the past year, but is confident of its future prospects under new leadership and technology. In a presentation to shareholders and media, CEO Penny Cox highlighted the company’s achievements and plans for the next year.

Key achievements in 2023

Despite the difficulties posed by the COVID-19 pandemic, Toys R Us has made several strides in improving its operations and financial position. Some of the key achievements include:

• Launching a new technology platform and websites for Toys R Us and Hobby Warehouse, which improved the online shopping experience and increased conversion rates, sales and marketing efficiency. The new platform also enabled the introduction of new features such as gift cards, vouchers, free gifts and bundles, which enhanced customer loyalty and satisfaction.
• Increasing national exposure for the Toys R Us brand in the key seasonal selling period through media and national free-to-air television campaigns, which boosted brand awareness and customer acquisition.
• Raising $1.31 million from private investors, including directors and related parties, who showed their confidence and support for the company’s vision and strategy.
• Accessing $1.5 million in additional facility from debt financier, which provided the company with more liquidity and flexibility to manage its cash flow and working capital.
• Reducing annualised overheads and expenses by $1.5 million, by streamlining processes, optimising resources and cutting unnecessary costs.
• Agreeing an orderly exit from the UK market with TRUK, which released the ANZ business from $2.6 million liabilities upon transfer of licence. This allowed the company to focus on its core markets and reduce its exposure to risks and uncertainties.
• Refreshing the share register and recycling equity with new US-domiciled retail shareholders now holding over 10% of the company’s stock. This diversified the shareholder base and increased the company’s access to potential capital and partnerships.

Operational and funding outlook for 2024

Toys R Us expects that its operating cash flows will continue to improve as the cost reduction and margin improvement initiatives it is putting in place deliver results. The company is also undertaking further activities that are expected to result in significant cost reductions and additional cash injections, such as the sale of unused assets.

The company estimates that these cost reductions, margin and operational improvements, and capital and debt management initiatives will provide the company with 4 to 8 quarters of cash runway. This will allow the company to build out the partnerships, brand awareness and personnel required to maximise the value of its key brand assets: Toys R Us, Babies R Us and Hobby Warehouse, while exploring other strategically complementary brand and e-commerce shopper segments.

Future vision under new leadership

Penny Cox, who took over as CEO in October 2023, expressed her optimism about the future of the brands under her leadership. She said that as a shareholder who, like many others, “doubled down” and invested fresh capital in the last equity raising to support the transition to new leadership, she and her family are optimistic that they will see significant value creation under her leadership.

She also praised the new Chair of the Board, Kelly Humphreys, who joined the company in November 2023, for her extensive experience and expertise in the retail and e-commerce sectors. She said that together, they believe that the company has a pathway to profitable growth based on the capability of its people and the capacity of its technology platforms, supporting the best toy, baby and hobby brands in the world.

Cox acknowledged that the company did not meet the expectations of the Board or the shareholders in FY23, and that it has since entered a period of transformation, to come out the other side a stronger company.

She said that the company has implemented a technology overhaul, improving stability and enabling the migration of the Toys R Us and Hobby Warehouse websites to a SAAS platform by November 1st, 2023.

She said that this change gave shoppers access to functionality that was previously unavailable, and that the company has seen website conversion rates double from 1.2% to 2.4%. She also said that the company is seeing that customers are able to discover more items, buy a more diverse range of products and add more to their carts.

She also said that the company has reduced its monthly warehouse-related variable costs by 37% without compromising on customer experience, and that it has cleared over 50% of the troubled stock identified in the FY23 financial report, while managing to maintain gross margins.

Moving forward into 2024, Cox said that her focus is two-fold: fixing the balance sheet and achieving profitable and sustainable growth for the business. She said that the company is first fixing the cost base before it can accelerate revenue growth into Christmas 2024. To this end, she said that the company has already reduced annualised overheads and expenses by $1.5 million, as well as agreeing terms for a sublease of the Clayton site, generating net $1 million annually (versus a $2.4 million cost previously).

She also said that the company is actively pursuing new business models that have been proven overseas, including physical retail through partnerships in 2024. She said that the company is in advanced discussions with several potential partners, and that it expects to announce some exciting developments in the coming months.

She concluded her presentation by thanking the shareholders, customers, suppliers and staff for their continued support and loyalty, and said that she looks forward to sharing more updates and achievements in the future.

Toys R Us CEO Louis Mittoni resigns

Toys“R”Us sells Chill Factor business to Character Promotions for $1.31 million