Tuesday, March 4, 2014

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.

7 comments:

  1. What? Wait a minute!

    I thought those guys in the White House said the economy was getting better?

    ReplyDelete
    Replies
    1. Oh come on now Mystic Scholar. Don't try to score cheap political points on this topic it matters too much to the people losing their jobs and doing so doesn't reflect reality.

      We both know that of these companies only Toys R Us is the surprise (and even it isn't really if you've been looking into their mismanagement over the last few years as the guys and gals at CNBC have been doing). They all suffer from not being the best option out there for consumers as online retailers are far easier to use and cheaper to boot. Wal-Mart, and Amazon in particular, are kicking their collective butts and both companies are expanding as a result.

      If they wanted to avoid this problem they needed to adjust their strategies far earlier than they did and now, as a person with many friends working in those companies, we have to hope they get it together.

      Delete
  2. Last time i went to Toys-R-us I was actually rather unimpressed with the range of merchandise they had. Everything looked like it was represented by only one or two brands or over developed licensed lines. I had the devil of a time finding actual toy soldiers.
    the only advantage Toys-R-us had over Wal-mart is there was more of each category in toys-r-us.
    Radio shack is screwed by the fact we do not live in the same do it yourself environment that existed years earlier, electronics devices are now firmly in the land of "it just works" the semi-hobby nature they once depended on just isn't there like it once was. I've built a radio from scratch and an old broadcast t.v. signal decoder, I don't know if i'd bother to go to radioshack to build an mp3 player from scratch I certainly never went there for anything major when I was into building and upgrading my own computer (man oh man my 40mhz system with 20 megs of RAM and 2 hard drives with over 300 MB used to be an amazing rig). times change and if your business doesn't change with those times it fails.
    Wait and see what inexpensive and easy 3d printing does to manufacturing and retail during our lifetimes, civilization is going to change.

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    Replies
    1. "I certainly never went there for anything major when I was into building and upgrading my own computer (man oh man my 40mhz system with 20 megs of RAM and 2 hard drives with over 300 MB used to be an amazing rig)"

      What's bad is I remember when it was and my heart jumped a beat when I read that because my first thought was "Fuck that the shit," and then I remembered that my hard drive is 2 terabites and I have 16 gigs of ram.

      Delete
    2. "Wait and see what inexpensive and easy 3d printing does to manufacturing and retail during our lifetimes, civilization is going to change."

      It's actually really fucking scary when you think about how it's going to effect the economy. Exciting, infinitely exciting, but scary at the same time.

      Delete
    3. it was over 20 years ago, i was even using OS2 for a while to actually get some use out of a 32 bit processor, I had to call IBM support to get an update to install on a floppy that just refused to recognize drive B was my 3.5 inch drive, they called me back and faxed me a segment of a DEBUG code I had to write to install the update on my system, talk about customer support, but also no surprise IBM has been out of the regular desktop OS business for a long time; adapt or fail.

      Delete

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