Here’s Why Toys ‘R’ Us is Flaking on IPO
Toys ‘R’ Us has decided to pull its plan for an initial public offering. Owned by Bain Capital LLC, KKR & Co. (NYSE:KKR) and Vornado Realty Trust (NYSE:VNO), Toys ‘R’ Us filed its first IPO documents with the U.S. Securities and Exchange Commission almost three years ago. According to Bloomberg, the toy chain with 1,500 stores cited “unfavorable market conditions and the company’s recently announced executive leadership transition.” The decision to stop the processing of going public with the company was filed yesterday. Toys ‘R’ Us CEO Gerald Storch announced last month that he would step down.
In a different filing yesterday, Toys ‘R’ Us revealed its fourth-quarter revenues and profits. Profit dropped 30% to $239 million from the same quarter last year and fell 75% to $38 million from the previous fiscal year (February second is the end of the toy company’s fiscal year). Quarterly revenue was no better. It fell 2.6% to $5.77 billion from the same quarter in the previous year, driven by a 4.5% same-store sales decline in the US.
Toys ‘R’ Us’s owners–Bain Capital LLC (founded by former Presidential candidate Mitt Romney), KKR & Co. and Vornado Realty Trust–have been trying to turn the large toy store chain around since they bought it in 2005 for $6.6 billion. By this time, the toy chain was already struggling to keep market share. Stiff competition driven by lower prices by large retail chains like Wal-Mart (NYSE:WMT) and Target (NYSE:TGT) were making Toys ‘R’ Us a less attractive option for parents shopping for toys.