Hard Times for Radio Shack, Best Buy, and Toys R Us.
Things are continuing to look grim for retailers this spring as reports are coming on the future of Toys 'R' Us, Radio Shack, and Best Buy. Sadly, these companies that once represented retail bastions for gamers, geeks, and collectors of all stripes are seeing continued sale reductions and a crowded marketplace that they simply cannot compete in any longer.
Toys 'R' Us: Unable to Compete and Crushed Under Debt
This morning it was reported by ICv2 that Toys 'R' Us will be cutting stores and employees after a hard and disappointing holiday season (see Chains Cutting for more). This comes at the tail end of a hard couple of years as Toys 'R' Us as sales have continued to decline in the face of stiff competition from on-line retailers such as Amazon. According to a recent SEC filing (see report 2/26/2014, Report of unscheduled material events or corporate event) the company's domestic sales were down 4.1% compared to last year's holiday season - which was also down from the previous year at a rate of 4.5%. As a result of such negative sales a series of drastic response measures are rumored to be announced in the coming days.
According to reports the company will announce the lay-offs of 200 employees in the corporate offices in Wayne, New Jersey (see Ailing Toys 'R' Us to lay off nearly 200 employees for more), and the closing of nearly a 100 stores (see Toys 'R' Us says it will cut 200 jobs at headquarters for more) in the coming days; a move that represents reducing the overall Toys 'R' Us workforce by over 10%. In real terms that means that the Toys 'R' Us workforce will be reduced from 41,700 to roughly 37,530 and the company will have 730 stores rather than the 830 it currently operates.
Among the many problems affecting the company is its crushing debt. Currently the company has an outstanding debt of $5.7 billion which has increasingly led to rumors that the company would be filing for bankruptcy - a rumor the company is desperately trying to convince toy makers will not be happening.
Best Buy: Cutting Out the Middle Man.
According to the New York Post Best Buy is continuing its cost cutting efforts begun in 2012 when the chain closed 50 stores (see Best Buy Store Closingsfor the complete list) and continued in 2013 with a reduction in staff and additional store closings. This latest round of efforts has seen the termination of 950 employees in Canada (see Best Buy Canada to Lay off 950 stafffor more) and the dismissal of 2,000 middle managers within the company (see Best Buy Cutting 2000 Managers for more).
The laying off of so many middle managers, many of whom are making six figures, is seen as part of a larger restructuring plan orchestrated by Best Buy CEO Hubert Joly to make the retailer viable in the future. However, with sales continuing to decline (down 2.3% this holiday season) it is being reported that this is but the first round of lay-offs for the company this year (see Massive Layoffs at Best Buy, Huge Management Restructuring for more).
For its part, Best Buy has claimed that the fierce competition on price matching was the leading cause for its drop in sales.
Radio Shack: Looking at the End?
For the last four years sales at Radio Shack have been in free fall (see Radio Shack closing 1,100 stores after sales tumble 20 pct for more), and today the company announced plans to close 1,100 stores. In a recent SEC filing (see 3/4/2014 Annual Report for more) the company had a net loss of $191.4 million.
The situation is as dire for the company as you can imagine and reading the SEC filing it is clear that they recognize the overwhelming challenge facing them. No word yet on how many of 27,500 currently employed associates will be let go by this move.