Toys 'R' Us lays off roughly 250 corporate employees

Dive Brief:

Toys “R” Us Inc. has laid off some 250 people (between 10% and 15% of its staff) at its Wayne, NJ headquarters, The Wall Street Journal reports. A request for comment from Retail Dive to Toys R Us was not immediately returned.
The toy retailer last month reported a same-store sales decrease of 2.5% domestically and 4.9% internationally, for a consolidated 3.4% decrease for the nine-week period ending on Dec. 31, 2016.
The holidays were something of a must-win for the company, which sold its iconic FAO Schwarz unit last October and has refinanced its debt amid struggling sales, especially in non-toy categories.

Dive Insight:

Toys "R" Us joined other retailers in feeling the end of the year pressure, which for many has resulted in the need to rethink staffing and store counts. While Moody’s Investors Service's lead retail analyst Charlie O’Shea noted in December that the company was on firm ground considering its Q3 was slightly better than the year-ago period, he also warned the toy retailer needed to run a tight ship over the holidays.

That didn't happen. Considering the weak holiday showing, O'Shea said the company must now contend with the extent of discounts’ destruction of margins. “Toys’ acknowledgement that the toy sector was highly-promotional over the core Holiday season fits into our assessment, and thus we are not surprised by the company’s topline challenges during the season,” he said in a note emailed to Retail Dive in January. “The other shoe to drop here, which will happen following the end of the quarter, will be how well margins held up, which will reflect the level of pricing and promotional discipline that Toys was able to employ during the season. This level of discipline will determine overall operating income performance, which is the key credit consideration.”

Though toy sales were fairly healthy, retailers in general turned to promotions to drive sales, and Toys "R" Us in particular faced new competition from department stores. Over the holidays, Macy’s added the category to its off-price Backstage pop-ups in full-line stores, Hudson’s Bay stocked toys and Kohl’s brought in the popular American Girl doll line.

“Despite the fact that our operational execution was significantly improved versus last year, the marketplace environment precluded us from achieving the top-line growth we had planned for both our domestic and international markets,” Chairman/CEO Dave Brandon said in a statement in January.