The slide of Toys R Us into administration last week seemed a long time coming.
Toys R Us in the UK has long been an operator that has missed clear chances to monetise its position with landlords when it is a key anchor retailer on so many prime schemes.
It also has quite significant freehold and long-leasehold ownerships that it could have asset managed much more intensely over the years. It is seeking to do so now but it is too late for that value to benefit the business or fund the investment that has been so needed for so long.
The performance of Toys R Us as a retailer in the face of competition from Smyths Toys, Argos and others stands in stark contrast to that of Dixons Carphone brands PC World and Currys when faced by the arrival in the UK of Best Buy from the US. Dixons Carphone invested in its stores and online capabilities, arranged relocations and consolidations and invested in its staff. It saw off the competition, whereas Toys R Us has let a once-dominant position in its market go.
This is an extremely difficult time for Toys R Us’s many employees and members of its pension fund. We also estimate an annual rental value for the Toys R Us portfolio in the order of £50m at an average rental level of £17/sq ft, so this will create significant loss of income for landlords too, many of which will be providing investment and pension income for their unit holders and shareholders.
Retail is as dynamic a world as ever and it’s going through continued structural change driven by technology and the changing needs of consumers. The failure of Toys R Us is a clear demonstration of the need for retailers to continually invest and if necessary to reinvent themselves in order to stay relevant for consumers, both to survive and to thrive.
Will Andrews, director, KLM Retail