Aug 112004
Toys Wur Us?
(With full credit to my colleague Mike Mayor for the title)
Today’s announcement that Toys R Us was probably going to sell its retail toys business to focus on the better performing and higher margin and less Wal-Mart-threatened Babies R Us business made me a little sad.
It’s really no different than the way Sandy Weill turned American Can into Primerica asset management. Or how Jack Welch sold off GE’s small appliance business and built the company into a financial services powerhouse. Companies transform themselves all the time in search of better earnings and higher multiples.
But although it’s “just another” one of those corporate evolutions, I can’t help the notalgiac reflections on running up and down the aisles of Toys R Us with my parents when I was a little kid, begging them for, well, just about anything in the place. What’s next — Disney turning into a software company?
Oh, you missed what’s really going on in that announcement: the current management, which has had a history of lavish perks and poor decision making ability, has realized that the regular retail toy industry has too much competition to support the kind of margins needed for their traditional inefficient operation. As a result, all of the fat and lazy managers are now going to take over running Babies R’ Us, and let some people that actually want to run a lean, well organized, streamlined business take over Toys R’ Us. I wonder who will get to keep the “Posh” new campus in NJ.