Toys ‘R’ Us hires firm to help it explore options
Toys "R" Us' debt may have finally caught up with it.
With $400 million in debt coming due in 2018, Toys "R" Us is bringing in advisors to help the retailer weigh its options, which could include filing for bankruptcy protection. The nation's largest specialty toy retailer has hired Kirkland & Ellis, a law firm that specializes in corporate restructurings.
"As we previously discussed on our company's first quarter earnings call, Toys "R" Us is evaluating a range of alternatives to address our 2018 debt maturities, which may include the possibility of obtaining additional financing," Toys "R" Us spokeswoman Amy von Walter said in a statement
Toys "R" Us has been burdened with a heavy debt load since 2005, when it was purchased by private equity investors KKR, Bain Capital, and Vornado Realty Trust in a $7.5 billion buyout. The chain previously announced it is working with Lazard to help address its debt load, and it successfully refinanced some of its debt last year.
"While the decision of Toys R Us to appoint restructuring advisors is not necessarily a sign that bankruptcy is imminent, it is an indication that the company is in a very uncomfortable financial position," commented Neil Saunders, managing director of GlobalData Retail. "For a robust retailer, debt payments can be challenging. For a retailer struggling to generate sales growth while, at the same time, trying to invest to remain relevant — it can be the difference between success and failure."
Saunders noted that Toys "R" Us is challenged on many fronts, including that it suffers competition from online and physical "generalists" who discount toys to drive customer traffic, and that its large stores are "increasingly unsuited to what consumers want and expect."
"Against this backdrop, Toys “R” Us has to contend with the debt it accumulated as part of the leveraged buyout," Saunders said. "In our view, this is an example of private equity damaging retailers by not running them as commercial trading entities but as ATMs."
in June, Toys "R" Us posted a net loss of $164 million for its first quarter, up from a loss of $126 million a year earlier. Same-store sales fell 4.1%.
Toys "R" Us will report its second quarter earnings on Sept. 26.
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GNC taps Rite Aid chief as CEO
Ken Martindale has stepped down as chief executive of Rite Aid Stores to take the reins of the struggling GNC Holdings.
The specialty retailer of vitamins and supplements on Wednesday announced that Ken Martindale would succeed GNC interim CEO Bob Moran, effective Sept. 11. As part of the transition, Moran will become chairman, replacing Michael F. Hines, who will remain on the board.
Martindale most recently served as CEO of Rite Aid Stores and president of Rite Aid Corporation, where he was instrumental in leading the drug store chain's transformation, including the roll out of a new store format and an expansion of the company's loyalty program. His exit comes some three months after Walgreens Boots Alliance and Rite Aid scrapped a $9.4 billion merger agreement.
Martindale joined Rite Aid in 2008 as senior executive VP merchandising, marketing and logistics and rose through the ranks. In 2013, he was promoted to president and COO, and took on the additional role as CEO of Rite Aid Stores in 2015. Prior to joining Rite Aid, he was co-president, chief merchandising and marketing officer for Pathmark Stores.
"Ken is a proven leader with deep retail expertise, intimate knowledge of our business through his years of leadership with our partner, Rite Aid, and a record of success in transforming retail business models," said Hines. "I want to thank Bob for stepping in as interim CEO and for putting GNC on the right path."
GNC has struggled with declining sales in recent years. The company is working to turnaround its business with new marketing, a simplified pricing structure for customers and a revamped loyalty program. In July, the company reported net income of $15.7 million for its second quarter, down from $64 million in the year-ago period. Revenues totaled $641.0 million, down from last year's $673.2 million.
"We made good progress in the second quarter, and our investments in pricing, loyalty and improving the customer experience continued to deliver positive results," interim CEO Bob Moran stated in July. "For the second quarter in a row, we saw meaningful transaction growth, improvement in our dot.com business and increased enrollment in our loyalty programs. We believe this business is headed in the right direction, and we remain focused on execution and sales growth."
As of June 30, 2017, GNC had approximately 9,000 locations, of which approximately 6,800 are in the United States (including 2,378 Rite Aid franchise store-within-a-store locations) and franchise operations in approximately 50 countries.
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