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Don’t mention the ‘W’ word…it’s the Friday Blog!

Published on: September 15th, 2017

One subject has inevitably dominated the conversation wherever toy people have met this week; the global toy industry continues to hold its collective breath, as it waits for further news from Toys R Us. D-day is September 26th – that is the date on which the retailer has promised an update on its debt deliberations. Everyone and his dog has expressed an opinion on what may happen: we were even treated to the thoughts of some random bloke from Parcel Hero, as if he is some sort of expert on the matter. What next, the MD of Shoe Zone chips in his two pennorth?!

Writing a company’s obituary before anything has happened seems wholly inappropriate. What I am happy to do is to reference a couple of extremely well-connected and knowledgeable people, both of whom I spoke to several years ago about Toys R Us’ ongoing debt issues (which shows just how long this day has been coming). One – the CEO of a very large US toy company – suggested to me at the time that Toys R Us was such an important retailer for the major global toy companies that it would not be allowed to fail. In his view, the big boys would do whatever it took to bail TRU out of whatever hole it found itself. However, with credit insurance being pulled left, right and centre, can suppliers genuinely afford to risk shipping product that they may never be paid for?

I’ve seen figures this week putting TRU’s share of most of the big US toy companies’ turnover at around 10%. As with Woolworths’ demise a decade ago – inevitably, the ‘W’ word has cropped up in almost every TRU-related conversation I have had – losing 10% of turnover would be a major short-term hit. Although that scenario proved, despite a prevailing belief to the contrary, that the lost business would effectively be picked up by other retailers over time. “Now Johnny, we haven’t got you a Christmas present this year, because Woolworths has stopped trading” …said no parent ever.

The second individual I spoke to was, in current media parlance, ‘a person familiar with the situation’: he suggested there may come a time when the only way forward for TRU would be to press the reset button, wipe its debt out and start all over again. Maybe that time has come? Maybe a completely new business model could emerge, featuring smaller high street or mall-based stores, a model which has served TRU extremely well in the Asian market.

Or perhaps this whole exercise is a way of encouraging / frightening investors and banks to come to the table with workable solutions to avoid the worse-case scenario. Either way, we will know soon enough which way things are heading. A nervous ten days lies ahead…

Elsewhere, the senior managerial merry-go-round is in full swing. Hornby has announced that chief executive Steve Cooke will be stepping down, once a successor has been found. Meanwhile retail bigwigs are having a competition to see who can stay in their job for the least amount of time: Mothercare chief commercial officer Andy Harding has left after a mere couple of months in the role, while Hobbycraft CEO John Colley managed a whole eight weeks before deciding to move on. Crikey, I think I have cheese in my fridge which has lasted longer.

On a more positive note, I understand that Stewart Middleton will be leaving his role as managing director at Jumbo after two and a half years to join IMC as sales director. He will start in his new role – which is right on the doorstep of his York home – in the middle of next month.

Finally, Argos has thrown an interesting curveball into the festive retail marketing mix with the launch of its dedicated toy catalogue this week. A 152-page publication featuring nothing but toys certainly makes a bold statement. I wonder if this new initiative is in any way related to the ongoing trial to phase-out the main Argos catalogue? If it means we finally get images that you don’t need a magnifying glass to see properly, I can see many suppliers being in favour.

The Argos toy catalogue also seems to have caught a few people in the trade unawares; although surely some people knew and were sworn to secrecy? Because if not, that suggests the whole thing was funded by Argos themselves…now that really would be an interesting development.

 

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