The nation's second-largest toy retailer behind Wal-Mart Stores Inc. disclosed plans yesterday to restructure its toy business, but said it is considering selling the business outright as part of an effort to dramatically reduce operating and capital expenses.
The $11.6 billion company is also pursuing a possible spinoff of its fast-growing Babies "R" Us, whose 200 stores sell furniture, including cribs and bedding, as well as accessories. The company will begin operating the toy and baby businesses as separate entities.
The Babies "R" Us division has been the company's growth vehicle, and has not been as vulnerable to discounters, Standard & Poor's credit analyst Diane Shand said in an S&P statement affirming its ratings on Toys "R" Us remained on CreditWatch with negative implications.
The company's US toy division, however, has been inconsistent since the mid-1990s, when Wal-Mart ramped up its toy department as it also dramatically expanded the number of stores.
Babies "R" Us, which represents 15 percent of the company's total revenue, posted sales of $1.76 billion, up nearly 11 percent, for the year ended Jan. 31. Meanwhile, revenue from Toys "R" Us fell 4 percent to $6.48 billion.
John Eyler, chairman and chief executive, said the global toy and Babies "R" Us businesses are at "fundamentally different phases in their growth cycle," and separation would give the baby business more opportunity to continue its healthy growth.