A Brutal Week for Toys R Us (Short Giraffes)

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The week isn't even over yet and so far it's been full of good news and bad news for Toys R Us. Who are we kidding? It was mostly bad. The good news first: the bankruptcy court granted the company additional time to (i) exclusively submit a plan of reorganization and (ii) figure out what it wants to do with its store leases. So, rather than reject its leases by mid-January, the company now has until mid-April. The benefit of this, of course, is that the company gets to take advantage of its store footprint during the crucial holiday season. The disadvantage of this, however, is that it eliminates an excuse for dogsh*t numbers in Q4 '17.

Speaking of dogsh*t numbers, the company reported Q3 '17 results. The newly enriched company CEO Dave Brandon didn't use "dogsh*t" to describe the results but he might as well have, saying "[o]ur results for the quarter were disappointing." Right after that he threw babies and smart kids (read: "learning") under the bus, highlighting those segments as particularly challenging. Here are the highlights:

  • Same store sales were down 4.4%. 
  • Net sales were down $89mm. 
  • Gross margin was down 4% (and 5.8% in the US due to vendor tightening and a "competitive pricing strategy," otherwise known as discounting).
  • SG&A was up $13mm (subsuming restructuring advisory fees...these guys have no idea what's coming on that front).
  • Operating loss was $208mm.
  • EBITDA was negative $97mm, a $102mm swing from the prior year period. 
  • Net loss of $624mm compared to $160mm in the prior year period. 

In other words, B.R.U.T.A.L. 

Hang on though. Things can't be all bad can they? Well, in the UK there are fears of a full shutdown (firewall) and thousands of job losses. But what about Star Wars driving massive toy sales? Apparently that isn't looking like quite A New Hope either. See what we did there?