And breathe. After a dramatic creditor’s meeting – which was paused twice to allow for further negotiations between the Pension Protection Fund and the retailer – the Toys R Us CVA was voted through yesterday afternoon with a comprehensive 98% majority. It has been a long week, with many twists and turns, and it certainly went to the wire, but for the 3200 staff, suppliers, landlords and many other businesses which would have been immediately impacted by TRU entering administration, the relief was palpable. Meltdown has been avoided.
The support of the Pension Protection Fund became the crucial factor in proceedings, after it had confirmed earlier in the week that it would vote against the CVA unless it received assurances and – more importantly – funds to start addressing the gaping pension deficit. Its initial request for an immediate payment of £9m was declined by TRU. In the end, a staged payment of £9.8m was agreed – £3.8m in 2018 and a further £6m in 2019 and 2020. Essentially, this now means that TRU needs to deliver a trading surplus of £10m over the next three years in order to fulfil its pension commitment. In addition, the PPF has become a ‘more’ secured creditor, taking charge over a number of unspecified assets.
Although chapter one is now closed, chapter two is only just starting – the real fun starts now. Negotiations with landlords, credit insurers and suppliers, not to mention the lengthy process of restructuring a business which has made a loss in seven of the previous eight years. But, for now, the UK toy trade – and particularly TRU employees – just received the best Christmas present they could have hoped for.
Frankly, it’s nice to have some positive news to convey, as I’m very conscious that the last few Blogs have not been over-flowing with festive joy. In fairness, I’ve been doing my best, given the reality of what has been happening out in the market. As my dad would have said, it has been a funny old year – if anything sums up 2017, it is an Apprentice winner whose ground-breaking idea is to put sweets in plastic cups or boxes and flog them to ‘corporations’ for exorbitant sums. A hitherto untapped market, admittedly, but largely because most corporations have more important things to worry about than sending Graze boxes with added diabetes to their contacts. This is the world we now live in.
Back in the toy world, weekly numbers continue to follow the pattern set in October and November – week 49 was 9% down, following the 11% drop in week 48. After last week’s Blog, I had an interesting conversation with NPD; it turns out that not everyone within the organisation was in accordance with the belief that the market would end up only 1% down at the end of the year. Apparently, the December numbers needed to be +9% for the year to end up level. Looking at weeks 48 and 49, that scenario now looks unlikely to say the least – especially as one prominent retailer has suggested to me that trading in week 49 was actually better than week 50. However, it is worth bearing in mind that whatever final number we arrive at, 2017 is still apparently on course to be the second-best year ever for the UK toy market. Sometimes, it’s all a question of perspective…
The testing festive trading climate also answered a question I posed to Gary Grant several years ago: “would you reconsider your decision to open your stores on a Sunday if business became really tough?” As numerous media articles reinforced, the answer remained an emphatic “no”. The Daily Mail even put an estimated monetary figure on the closure of The Entertainer’s stores on Christmas Eve – £2m. Nevertheless, Gary stuck to his guns, and you have to admire the fact that he has stayed true to his principles, regardless of what it might potentially cost the business in cold, hard cash terms. I know that not everyone will agree with this, but in a business world where the concept of ‘principle’ is increasingly becoming an alien concept, I personally think that respect is due. And anyway, maybe the sales simply transferred to other days: I saw one tweet which said: “Doing the rest of my Xmas shopping at The Entertainer after finding out they give their staff Xmas Eve off.”
Looking ahead to 2018, I’m in the process of finalising my Hong Kong diary, so if anyone would like me to pop in to see them in the TST showrooms or at the Hong Kong Toy Fair in January, feel free to drop me an email. Also, a quick reminder about the Hong Kong football match, which is set to be the highest-attended yet. Over 280 tickets have been sold so far (beating the previous record of 240), so if you’d like to join the fun, email David.Bramford@charactergroup.plc.uk to order a ticket. It sounds like pretty much everyone is going to be there, so you know what they say – if you can’t beat them, join them!
The Friday Blog will be taking a break until the New Year, and will return on the 5th January. All that remains for me to do is to wish everyone a wonderful Christmas and a Happy New Year – as John Lennon said, “let’s hope it’s a good one”.