Toys R Us files for bankruptcy

Toys R Us has filed for chapter 11 bankruptcy protection, the company announced Monday.

The bankruptcy filing helps the Wayne New Jersey-based toy retailer relieve itself of the debt left over from its $6.6 billion acquisition by Kohlberg Kravis Roberts, Bain Capital Partners and real estate investment trust Vornado Realty Trust in a 2005 deal valued at $6.6 billion.

The retailer has $4.9 billion in debt, $400-million of which has interest payments due in 2018 and $1.7 billion of which is due in 2019.

“Today marks the dawn of a new era at Toys”R”Us where we expect that the financial constraints that have held us back will be addressed in a lasting and effective way,” said Dave Brandon, the company’s chairman and CEO, said in a release announcing the filing.

“We are confident that these are the right steps to ensure that the iconic Toys”R”Us and Babies”R”Us brands live on for many generations,” he adds.

The toy seller also intends to seek protection in parallel proceedings for its Canadian subsidiary.

The company said it will continue to operate as usual its approximately 1,600 Toy R Us and Babies R Us stores around the world. The company’s operations outside of the U.S. and Canada are not part of the protections proceedings, it said.

The retailer said that it has already received a commitment from some lenders, including a JPMorgan-led syndicate, for over $3-billion in debtor-in-possession financing. Although that’s subject to court approval, Toys R Us said it “is expected to immediately improve the Company’s financial health and support its ongoing operations during the
court-supervised process.”

Restructuring that debt would give Toys R Us the financial flexibility to continue its turnaround. Initiatives include improving its website and revamping its Babies R Us business, by focusing on items like cribs that are less likely than diapers to be sold on Amazon.

A bankruptcy filing will also help the retailer manage the the crucial holiday season and give vendors like Mattel and Hasbro clarity into its long-term plans.

For its owners, the bankruptcy filing ends a chapter that started at a time when private equity dove into the retail industry, buoyed by low interest rates and the attraction of recognizable names. That flurry has come back to haunt many, as debt burdens have made it difficult for retailers to make the necessary investments to adjust to the rapidly changing retail industry.

Private equity-backed Payless ShoeSource and Gymboree are among those that have filed for bankruptcy over the past two years.

For Vornado, the deal was a bet on the value of Toys R Us’s real estate. It came just a year after K-Mart and Sears merged in an $11-billion deal based on the idea that combining the real estate value of the struggling stores would strengthen both.

Many retailers have over the past year shed their real estate footprint, finding the U.S. store-base too vast and too out of sync with the many American shoppers that no longer go to the mall.

By Lauren Hirsh for CNBC

Post-it notes with emojis. Locker magnets that resemble pizza and poop. Pencil boxes featuring T.rex. These are some of the many back-to-school items currently sitting on the shelves of a Wal-Mart store in Toronto.

But Rhonda Johnson, of Unionville, Ont., skipped all of that during a recent visit as she was browsing through the store with her nine-year-old son, Jahziah.
“I am the type of parent who buys something that is going to be functional and serve its purpose,” she says. “It’s going to be plain. It’s not going to be glittery.”

Back-to-school supplies, particularly stationery, have changed considerably in recent years, and are now marketed as “fashionable” items. Some feel the items allow kids to express themselves, but others argue that they detract from learning and are a waste of money.
Ms. Johnson finds fun, fashion-forward stationery expensive and “unnecessary.”

“I do not conform to society’s way of dragging you into certain trends,” she says.
The 42-year-old buys only unadorned stationery for her son, and it has always been that way for him and his older brother, Dre.
But that hasn’t stopped Jahziah from asking for a Pokemon binder or a notebook graced with the Minions from Despicable Me.
“I’ve said no for so long … [but] he still asks because it’s attractive,” Ms. Johnson says. “It’s marketing.”
Meanwhile, some 40 students in a small town in Britain won’t be allowed to use fancy gadgets at school, but not because their parents said so.

Ian Goldsworthy, a Grade 6 teacher at a school in Potters Bar, slightly north of London, has banned novelty stationery – erasers in the form of nail polish, that new “it” plastic water bottle, pencil cases almost taller than the child carrying them – from his classroom.
“It was causing too many arguments,” he says, noting that his students would flaunt the latest gimmick and wait for others to notice, get distracted when someone pulled out something shiny or sparkly and become obsessed when things went missing.

He says he had enough around Easter of 2016, when he asked his students to empty their desk drawers and put anything that they didn’t need for the lesson at hand in their backpacks.
“It wasn’t a big revolt,” he says. “There was some disappointment, but they were pretty understanding.”
They talked about the reason behind his decision as a class.
“It wasn’t me just saying from [up] high, ‘This is how it’s going to be,'” Mr. Goldsworthy says. “They could see the logic of the argument. [They] knew it would help [them] focus.”

On the first day of school every year, Mr. Goldsworthy draws up a classroom contract with his students about the rules they think will best support their learning. He’ll be adding “only bring in stationery I need” this time.
Not all teachers feel the same way.

Liane Zafiropoulos, who teaches Grade 5 at a school in Ajax, Ont., doesn’t have a problem with trendy stationery. She says her students already know the general rule that only items that infringe on their learning will be banned.
“As long as the children are writing and learning, I am happy,” she says.
The 40-year-old keeps a treasure box of special stationery in her classroom, which she lets students pick from whenever they exhibit good behaviour.
Ms. Zafiropoulos says children’s stationery is an expression of their individuality. “We might as well put them in uniforms if we are going to give them all plain pencils,” she says.
But what bothers Ms. Zafiropoulos is that some of her students cannot afford certain back-to-school supplies. “They illustrate how commercialism consumes us,” she says. “At the end of the day, it’s the corporations who get richer and the families who suffer.”

Households in Canada are expected to spend $883 on back-to-school shopping this year, up from $450 last year, according to a recent Angus Reid poll of more than 1,500 Canadians.
David Lewis, an assistant professor of retail management at Ryerson University, says manufacturers are trying to make stationery – what was traditionally a relatively utilitarian and straight-forward type of product – more “hedonistic.”
“If you can turn a pencil into a toy, then it creates an entirely new market for existing products,” he says, adding that stationery is now “more fun, exciting and pleasurable.”
Mr. Lewis also sees interesting parallels between how cereal and stationery are marketed to children these days. He says both products serve different purposes for the purchaser and the influencer. “Parents are looking at nutrition,” he says. “Kids are looking at fun,” which means cartoon characters and bright food colouring.

It’s the same with stationery, where parents are evaluating functions, while kids are concerned with fun and being unique, Mr. Lewis says.
Patty Sullivan, a Toronto mother of two, doesn’t mind.
“It makes [my kids] more willing to go back to school,” she says. “They complain less.”
She also sees it as a way for children to personalize their stuff and show their friends what they like. She recently bought 18 scented markers – which smell like cotton candy, cappuccino, evergreen trees and brick oven – for $10 at a DeSerres art supply store.
If Canadian schools were ever to follow in Mr. Goldsworthy’s footsteps, she thinks teachers should consult parents first. It would be kind of a big deal for her children, she says.
Her six-year-old, Aliyah, says she would feel “bad,” as would her 10-year-old sister, Veronica.
“I would probably feel disappointed and depressed,” says Veronica. “I like seeing my happy and amusing [stationery] in class.”
A retired elementary school teacher in London, Ont., can still relate to that feeling.
It’s why Debra Rastin discouraged – instead of banned – her students from using pencils with anything at the end, from 2010 to 2015, the last five years of her career. Whether it was trolls with blue hair or soccer balls, she considered them “toys” and too distracting.
But the 63-year-old also remembers what it’s like to be 6 and excited about having something new to bring to school.
“Fifty years ago, a pack of pencil crayons was fashion-forward,” she says.

By Chris Young for The Globe and Mail

Back-to-school season has long been a critical sales event for retailers, but 2017 may go down as a year that defies the trends as shoppers play a waiting game for sales.

Kids started back to school this month, but as of early August just 45% of shoppers have checked everything of their list, according to the National Retail Federation’s annual survey conducted by Prosper Insights & Analytics. It’s the lowest number since 2012.

However, 2012 was a record year for back-to-school spending as shoppers indulged in pent-up demand following the spending lull of the Great Recession. In all consumers shelled out a whopping $83.8 billion, according to NRF that year and are projected to spend $83.6 billion in 2017, up more than 10% from 2016.

And 2017 is off to a slow and worrying start. Many began early, according to NRF, researching needed items, perusing online class lists and comparing prices. But traffic has slowed in August and it’s anybody’s guess if it will pick back up.

What are shoppers waiting for? Discounts, suggests Prosper Insights & Analytics (and fellow Forbes contributor) Pam Goodfellow. This trend follows that of the winter holiday season, where consumer play a game of chicken with retailers, waiting and watching prices drop as the deadline gets closer.

In this regard, back-to-school 2017 could be a preview for the holiday season to come. Already, early reports indicate retailers could have a banner winter holiday season, particularly when it comes to e-commerce, where sales are projected to rise some 16.6%, according to eMarketer.

“People are confidently spending more and really spreading out their shopping throughout the season,” Katherine Cullen, director of retail and consumer research at NRF, told Retail Dive in an interview. The association still expects spending to be higher in aggregate this year than last, but with so many waiting, back-to-school is beginning to look a lot like Christmas.

By Laura Heller for Forbes.com 

Retailers across America have been closing stores in droves this year amid years of declines in sales and customer traffic and an increasing threat from Amazon.

So far in 2017, retailers have shut down more than 6,300 stores. UBS says the sneaker retailers Foot Locker and Finish Line could be the next to start closing stores.

UBS’ findings come following Friday’s dismal second-quarter results from Foot Locker that caused shares to plummet by nearly 30%. The company announced earnings of $0.39 a share on revenue of $1.7 billion, both of which were shy of Wall Street expectations. Additionally, same-store sales sank 6% versus a year ago. Foot Locker shares have plunged 57% over the past three months.

On Foot Locker’s quarterly conference call, chairman and CEO Richard Johnson said he wasn’t worried about Amazon. Here’s Johnson (emphasis ours):

“For our part, we will continue to invest in creating compelling experiences for our customers. At the premium end of the market, most of our customers don’t want to just buy a specific product they see on a screen. They want that product to have a connection to an experience they find meaningful and want to participate in. That experience could be a special event in a store, being notified of or discovering a video on our website or YouTube channel of an athlete or celebrity wearing or discussing the latest product, an interaction with their friends while touching and feeling the product, or simply a conversation about sneakers with one of our stripers or other store associates. For that reason, we do not believe our vendors selling product directly on Amazon is an imminent threat. There is no indication that any of our vendors intend to sell premium athletic product, $100-plus sneakers that we offer, directly via that sort of distribution channel.”

But in a note sent to clients on Monday, UBS analyst Michael Binetti downgraded both Foot Locker and Finish Line and said it’s “almost certain” that the sneaker retailers would lose market share to Amazon. He lays out three reasons he thinks things are about to get a lot tougher for the industry.

First, Binetti sees Nike stepping up its efforts to push sales directly to the consumer. That is especially worrying for Finish Line, which, according to Nike’s October 25 analyst day, sees 68% of its sales come from Nike. Binetti adds, “For Foot Locker in particular, while many of its stores are among the most compelling retail experiences in our US specialty coverage group, we think the company will have to significantly accelerate closure of its lower tier stores to properly absorb market share shifts to the brands own DTC businesses (and to Amazon).”

But the sneaker retailers’ problems don’t stop there. It appears consumers are now choosing to buy their Nikes on Amazon versus going into brick-and-mortar stores like Foot Locker and Finish Line. “UBS Evidence Lab survey shows that in ’17 for the 1st time, more consumers prefer to buy Nike on AMZN vs at FL,” Binetti wrote.

There was a “significant YOY increase in the percent of consumers who prefer to buy Nike product ‘on the brand’s own website,'” Binetti notes. “The combination of an accelerating shift of purchase to both Amazon and the brands’ own website — and the subsequent reduction in purchase intent through athletic specialty retailers like Foot Locker — makes it hard to see the path back to accelerating market share gains for Foot Locker.”

Finally, both Foot Locker and Finish Line have a large presence in malls that have lost the anchors Macy’s and J.C. Penney.
Specifically, Binetti says, “We think FINL is at particular risk (more so than FL anyway) of further deterioration in sales & traffic trends in its stores due to high exposure to lower-tier locations.”

As a result, UBS downgraded Foot Locker from “buy” to “neutral” and Finish Line from “neutral” to “sell.”

By Jonathan Garber for www.businessinsider.com

The Amazon Business office-supply unit has attracted large-business customers, despite a contention by the Federal Trade Commission and a U.S. district-court judge that Amazon would have trouble competing with Office Depot and Staples for these customers.

Amazon.com said its online store for office supplies has logged more than 1 million business customers since launching two years ago — including large firms that U.S. antitrust regulators and a federal court thought it would have trouble luring away from competitors.

The e-commerce giant is trumpeting the client roster of Amazon Business, as the unit is known, as a big success.

It’s 150 percent bigger than in July this past year. And it includes, Amazon says, companies of all sizes, from hospitals and restaurants to local governments and Fortune 50 companies. Amazon cited King County, the U.S. subsidiary of industrial conglomerate Siemens and Stanford University as clients. Amazon didn’t disclose total sales for the year.

Large institutions are key to Amazon’s new venture because they are the turf of rivals Office Depot and Staples, huge suppliers with the expertise to navigate big corporations’ stodgy purchasing practices that hinge on requests for proposal and multiyear contracts guaranteeing discount pricing.

When antitrust officials at the Federal Trade Commission (FTC) contested the proposed $6.3 billion merger between Office Depot and Staples in 2015, the companies contended that Amazon Business, as well as regional office-supply firms, would step up to fill any competitive void left by the combination.

The FTC, the companies said in a statement, “refuses to even acknowledge the rise of new competitors, such as Amazon, and the disruptive effects of the digital economy.”

In May 2016, a U.S. court sided with the FTC. Among the arguments wielded by the court was Amazon Business’ lack of “demonstrated ability” to compete in the business-to-business space “on par” with the combined might of Office Depot and Staples within the three next years.

The judge expressed skepticism that Amazon’s do-it-yourself approach to purchasing would fare well with the bureaucratic requirements of large corporations. “The evidence before the Court simply does not support a finding that Amazon Business will, within the next three years, either compete for large (requests for proposals) in the same way that Office Depot does now, or so transform the industry as to make the RFP process obsolete.”

In a news release Tuesday, Amazon said that its business-to-business platform offers “millions” of products from 85,000 sellers. Other customers highlighted by Amazon were Con Edison of NY, Gwinnett County Public Schools in the Atlanta area, Intermountain healthcare, Johns Hopkins University and the Mayo Clinic.

“We are grateful to our customers for helping us reach this significant milestone,” said Prentis Wilson, vice president of Amazon Business.

By Ángel González for Seattle Times 

The Federal Trade Commission is reportedly looking into whether Amazon’s discounts are as good as they seem.

As part of the FTC’s review of Amazon’sagreement to buy Whole Foods, the Federal Trade Commission is looking into allegations that Amazon misleads customers about its pricing discounts, Reuters reports, citing a source close to the probe.

The probe is based on a complaint from the advocacy group Consumer Watchdog, Reuters said. The FTC had no comment, saying as a rule it doesn’t confirm the existence of investigations. Consumer Watchdog earlier this month published a report claiming the online retailer “routinely uses inflated and fictitious previous prices to give consumers the misleading impression they’re getting a bargain.”

Amazon refuted the group’s pricing report.

“The study issued by Consumer Watchdog is deeply flawed, based on incomplete data and improper assumptions,” it said in a statement. “The conclusions the Consumer Watchdog group reached are flat out wrong. We validate the reference prices provided by manufacturers, vendors and sellers against actual prices recently found across Amazon and other retailers.”

Consumer Watchdog, which analyzed 1,000 items sold on Amazon, said the retailer often employs “previous” prices, which it alleges are designed to give the appearance of big discounts. Consumer Watchdog said the “previous” prices appear to replace Amazon’s “list price,” which earlier this year came under fire for allegedly failing to reflect the actual market price of an item.

“Amazon displayed reference prices on 46 percent of the products surveyed—a sharp increase from a similar sample taken just months before,” Consumer Watchdog said in its report. “They now employ several different kinds of reference price, including “was” prices, “sale” prices, or simply prices with a line through them (“strikethrough prices”).”

The report also alleges Amazon boosted the reference prices to about 70 percent higher than the historical price of the item.

In one example, Amazon said the before-sale price on a pack of LED light bulbs was almost $100, but offered the pack on sale for $14.99, showing that customers would receive an $85 savings. However, Consumer Watchdog said the site hadn’t charged more than $14.99 for the lightbulbs in the previous 90 days.

“Amazon appears to be increasing its use of reference prices on its site since last year, when it quietly eliminated many list prices,” the report said. “However, the result is the same: Amazon’s customers are being deceived into thinking they are getting a bargain, when in most cases they are not.”

Consumer Watchdog said it believes the Whole Foods acquisition should be blocked unless Amazon changes its pricing strategies.

By Aimee Picchi for CBS News

The Asian region is forecast to the world’s largest market for stationery products in 2017, according to latest data compiled by leading research firm Statista.

Global revenue for the ‘Hobby and Stationery’ segment in 2017 will reach US$132 billion with an annual growth rate of 11.3 per cent between 2017 and 2021.

Asia is forecast to emerge as the highest revenue generator in 2017, which accounts for around 42 per cent of global revenue of US$56 billion.

Hong Kong, as the major trade hub in Asia Pacific, has attracted the attention of brands and manufacturers from around the world through the greater prominence of the Hong Kong International Stationery Fair.

Jointly organised by the Hong Kong Trade Development Council (HKTDC) and Messe Frankfurt (HK) Ltd, the 18th edition of the Hong Kong International Stationery Fair will run from 8 – 11 January 2018 at the Hong Kong Convention and Exhibition Centre.

The four day fair expects more than 250 exhibitors from 11 countries and regions, and more than 20,000 visitors from around the globe.

The 2018 fair will once again feature five product zones, including DIY Supplies, Gift Stationery, Kids & School, Pen & Paper and Smart Office.

To offer a one-stop trading platform and better sourcing experience, the Hong Kong International Stationery Fair will be held concurrently with the HKTDC’s Hong Kong Toys & Games Fair, the Hong Kong Baby Products Fair and the Hong Kong International Licensing Show at the Hong Kong Convention and Exhibition Centre.

Source www.stationerynews.com.au

Staples finally sells up

Staples’ future under private equity ownership is all about online growth.

Having disposed of its international operations (including those in Australia and New Zealand) Staples has sold off the rest of ‘farm’ to a private equity group.

Sycamore Partners, a US private equity firm that specialises in retail, will pay US$6.9 billion for Staples, a company that has seen its sales, profits and store numbers decline in the wake of the online shopping phenomena, driven by the likes of Amazon.

Staples had sought to remain competitive in the online world by merging with Office Depot but the deal was blocked by US regulators last year and the companies abandoned the plan.

In its latest annual report, Staples was up front about the challenges it faced, stating it faced strong competition from wholesalers and local stationery stores.

“We also compete with online retailers such as Amazon.com, mass merchants such as Walmart and Target, warehouse clubs such as Costco, computer and electronics retail stores such as Best Buy,” the company said.

According to a report in the New York Times, Staples’s board and management decided to sell the company after shareholders had essentially lost faith in the business. Shares of the company were trading near US$7 earlier this year, having fallen sharply from about US$18 a share just two and a half years ago.

Sycamore’s offer of US$10.25 a share represents a 20% premium over the company’s stock price in early April, before initial reports of a deal to sell the company lifted shares.

Staples still sells huge volumes of paper, printer cartridges with a minority of its goods sold at bricks-and-mortar locations.

Around US$10.6 billion of its sales are delivered, compared with about US$6.6 billion sold in stores.

Source: Stationery News

Amazon has sent shockwaves through the food retailing business with its near $14-billion acquisition of natural and organic food chain Whole Foods.

The move has dominated the financial news over the past three days and has been called a game-changer for the food retailing industry, but could there be wider ramifications for the business supplies industry? We suggest a few things to think about…

Whole Foods locations could be used as collection points for Amazon online sales, providing customers with more delivery options.

Whole Foods stores could act as local distribution hubs for fast delivery, two hours or even less, and give Amazon a stronger last-mile delivery presence.

Amazon’s move could have a disruptive effect on the wider food retailing industry. There is already speculation about the need for accelerated consolidation in the mass and grocery sector, and if that happened that would affect vendors that sell into these retailers.

Amazon has been testing more consumer-friendly retail concepts, such as its Amazon Go initiative where customers just pick items off shelves without the need to go through a checkout. Acquiring Whole Foods will give it a wider test platform and could lead to faster adoption of some of these shopping innovations as well as speeding up digital transformation in the retail sector in general.

We have previously downplayed the idea of Amazon acquiring retail locations in the business supplies channel because there was no indication that it would make a significant move into the retail space. That has now changed, and the Whole Foods deal validates Amazon’s belief in an omnichannel experience that combines the digital and physical worlds.

Could this mean that Amazon now looks to acquire retailers in other business segments, such as office supplies, and that Staples or Office Depot’s stores could be on the Amazon radar? Possibly, especially if Amazon is not happy with the way that Amazon Business is growing; it hasn’t updated its customer and sales figures on Amazon Business in the US since April 2016. Is that because the growth rate has slowed and it’s not getting the traction it thought it would after Amazon Business’ initial success?

The Whole Foods acquisition is reportedly being driven by difficulties Amazon was having in growing its Amazon Fresh grocery delivery business. If Amazon Business is stalling or not growing fast enough, then why wouldn’t Amazon look at buying growth? We now know that this strategy is part of Amazon’s playbook.

By Andy Braithwaite for OPI.net

Follow us on social media: 

               

View our magazine archives: 

                       


My Office News Ⓒ 2017 - Designed by A Collective


SUBSCRIBE TO OUR NEWSLETTER
Top