Selling Barbie dolls and Hot Wheels to children may prove far easier than hawking Toys R Us to investors. The New Jersey-based company behind the iconic dolls and model cars filed its IPO paperwork in May 2010 but is now not expected to go public until 2012, two sources told Reuters.
Toys R Us has made it through the US Securities and Exchange Commission review process, so it could launch an IPO any time it wants - yet it is expected to delay the offering until next year, one of the sources said. The sources declined to be named as the information is not public. Toys R Us, which operates stores under its own brand as well as the Babies R Us and FAO Schwarz banners, declined to comment.
A decision to wait boils down to basic concerns about the markets and the travails of being a retailer with more than 40 percent of its annual sales coming from the holiday season. There are two big windows left this year for US IPOs. The summer window began this week, after the July 4 holiday, and will last until mid-August when much of Wall Street heads for the Hamptons. The fall window opens after the US Labour Day holiday in September, shuts temporarily for Thanksgiving, and lasts till mid- to late December.
Some of the immediate concerns about Greece's debt have eased but markets are wary of a crisis in Portugal. There is also still no deal on the US debt ceiling and the US unemployment rate just climbed to a six-month high. That means a tough IPO market, at least in the near term. Toys R Us is planning to wait out the summer window because of macroeconomic uncertainties, one of the sources said.
In general, there is less optimism about consumer and retail IPOs in the second half of the year. A survey of 100 investment bankers by accounting firm BDO USA last month showed that more than 40 percent of those surveyed expect consumer and retail IPOs to be flat and 36 percent expect them to decrease. Even if markets improve come fall, that would be a difficult time for Toys R Us to go public. Having an IPO in the autumn could be inconvenient with the retailer in the thick of preparations for the all-important holiday selling season.
Another industry source agreed: "Once you get past August, you are in prime shipping season. All the products (will be) coming in. You have got to set your stores. You have got to run your promos. From September to December, nothing else will get done besides preparing for holiday." Toys R Us first went public in April 1978 and operated as a public company until July 2005, when it was taken private by Bain Capital Partners LLC, Kohlberg Kravis Roberts & Co and Vornado Realty Trust in a $6.6 billion deal.
Toys R Us CEO Jerry Storch told the Reuters Consumer and Retail Summit last week that an initial public offering would depend on both the state of the markets and on company-specific factors. The retailer reported a wider net loss and a 2.1 percent decline in US same-store sales in its first quarter ended April 30. While it gained market share from mass discounters including Wal-Mart Stores Inc in the fourth quarter, its 2010 Christmas sales were still weaker-than-expected.