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The $6m question….it’s the Friday Blog!

Published on: February 15th, 2019

The week’s biggest toy story was undoubtedly the ‘comeback’ of Toys R Us – or Tru Kids Brands, as the new venture has been named. If you were locked in a darkened room finalising selections or churning out quotes and somehow missed the news, you can catch up here. It is still relatively light on specific detail, but in broad brush stroke terms, Toys R Us has claimed that it intends to return to the retail fray this year. One assumes that the US must be its primary target (I suspect the UK ship may well have sailed, for now at least), with the promise of an “omnichannel approach that is tech immersive and experiential with a smaller footprint.” Buzzwords all nicely ticked off, what are we actually looking at here?

Well, for starters, the trading names are the same, the management team is broadly the same (minus villain of the piece ‘Dodgy’ Dave Brandon) and the financial backers appear to be the same. So is it fair to say, as one person commented: “This was a slimy manoeuvre to wipe the slate clean and come back without debt.” In fact, another very well-known Toys R Us senior management figure told me at least five years ago that this was the only way it was ever going to end (before starting over again from scratch). So was this the plan all along? It’s hard to say, but a lot of people see it that way, and the anger and distaste in many parts of the toy industry is palpable. The $6m dollar question (literally in some cases) is ‘are suppliers prepared to forgive and forget’?

The vast majority of the comments we received followed a similar pattern; either incredulity that Toys R Us has the gall to just swan back in as if nothing ever happened, or more pointedly, asking whether they would be paid what they were owed. MGA’s Isaac Larian has been particularly vocal on this point, reaffirming via a personal LinkedIn message to me that: “We’ll take the whole $17m (before we consider doing any business with them). We should be paid in full. We kept on shipping TRU on credit to help save the company. Not right.” It’s hard to find fault with that assertion. There is one toy company you’ll never see in Toy World (although I zimpli couldn’t say which one) for very similar reasons. There may be a monumental difference in the sums concerned, but the principle is much the same.

So who will blink first? Will TRU offer MGA and other suppliers some form of recompense or a way of clawing back at least some of the lost millions? Would suppliers still feel they were entitled to the money if it was a brand new owner with a whole new team? Indeed, could TRU afford to pay up, even if they acknowledge it would be the right thing to do (and would the lawyers countenance such an arrangement, for fear of creating a dangerous precedent)? Or will they zimpli say “tough, that company no longer exists, do you want to supply us or not?” Some suppliers may feel they have little choice but to acquiesce, but I sense a pretty hardened attitude towards the new set-up in many quarters.

Of course, this doesn’t affect standalone operations such as Toys R Us Asia, which is in rude health. I met up with Jo Hall in Nuremberg to hear about their plans for 2019, and we’ll be delighted to share more details shortly. In the meantime, I can tell you that former Mothercare / ELC stalwart Nick Green has been recruited as the new MD for China, and there is a new board being formed for the Asian operation, of which Jo said: “I know who is coming and it’s a big statement. It will really elevate us.”

So, will be the next chapter in the history of TRU be an “exciting one”, as Richard Barry claims? Indeed, is “exciting” an appropriate term to use when you’ve just laid off workers and saddled many toy companies with a potentially ruinous debt burden. Or is that just the way business works these days?

Away from New Jersey, there have been plenty of other interesting developments this week. There was bad news from the Netherlands, as specialist chain Intertoys announced it had applied for court protection from creditors ahead of what it referred to as ‘significant restructuring’. Sold to British investment house Alteri in 2017, it’s hard to argue with Isaac Larian’s comment on my twitter feed that “hedge funds are killing retailers.” You have to feel for Fiona Murray-Young, who has been heading up the Intertoys operation for a while – hopefully something viable can yet be salvaged. Meanwhile, Debenhams has announced a partnership with Li & Fung as part of its refinancing package, which strikes me as a very sensible move. Li & Fung is, of course, the co-owner of Toys R Us in Asia – it couldn’t mean….no, surely not?!

Elsewhere, Grant Gie has left Sambro to pursue other opportunities, telling me that he wants to “take the time to find a great company and role that matches my passion and energy for driving businesses and categories.” I am sure he’ll find something suitable soon.

The Frozen II trailer was released this week: I am hearing very good things from US sources about the movie. The consensus from our house on the trailer was as follows: 1) Why have they turned Elsa into Frozone from The Incredibles? 2) Indeed, why the whole ‘superhero’ vibe? 3) Why all the trousers? Dress up sales may struggle to hit the dizzy heights of the first movie if the sisters wear those throughout the movie…

Finally – and in a circular way, back to Toys R Us – the two industry behemoths released their Q4 results at the end of last week. Hasbro missed its numbers, with the blame laid squarely at TRU’s feet. Conversely, Mattel’s figures were very well-received, with new CEO Ynon Kreiz coming in for fulsome praise from analysts and investors for his role in turning the ship around. A year ago, the roles were completely reversed – but that’s the toy trade for you: one minute you’re up, the next…

It will be fascinating to see what else emerges from the New York Toy Fair, which starts this weekend. If you’re going, have a great trip. Although we won’t be there this time round, we still have our finger on the pulse of what’s going on, as you can see from our exclusive reveal of what we believe will be one of the hits of the show – Wow Stuff’s amazing Harry Potter inspired Invisibility Cloak. You can read all about it elsewhere on today’s newsflash, and here is the first picture of this ground-breaking new item:

Told you it was good….!

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