TRU's succession crisis: with Staley out, now who takes the reins? - Retailer Profile: Toys "R" Us - Greg Staley has resigned as chain's president of U.S. division - Company Profile

DSN Retailing Today, Feb 10, 2003

In fall 2001, Toys "R" Us resurrected its charismatic, wise-cracking spokesgiraffe Geoffrey to tell the world about the changes taking place at the turnaround toy retailer.

Geoffrey the Giraffe casually chaffed to consumers about Toys "R" Us' renovated stores, compelling exclusives and friendly sales associates.

And while it's really anybody's guess as to why a giraffe makes for a good fit as the mascot of an international toy chain, the behavior of the African mammal is more closely aligned with retail politics then one might think.

Like shrewd retailers, giraffes--the most vigilant of big-game animals--rely on their well-developed senses to survive the perils of their environment. And like the revolving doors of retail executive teams, there are no permanent members of the herd.

As the saying goes, the only constant is change. This may explain why few in the toy industry were less than surprised when Toys "R" Us president and ceo John Eyler's right-hand man Greg Staley stepped down as president of the Toys "R" Us U.S. division.

The announcement came on the heels of disappointing holiday sales results. Comparable U.S. toy stores for the nine-week period declined 1% from the year-earlier period, and 1% year-to-date. It also laid the groundwork for an announcement a week later that the company plans to cut 700 store management and supervisory positions. That move, according to Eyler, was designed to reallocate funds to the associate level in an effort to "provide a level of service and sales interaction that will further differentiate [the company]" from the competition.

"The 2002 holiday selling season proved to be extremely challenging, and like many retailers we experienced a deceleration in sales in early to mid-December despite an intense promotional environment," said Eyler during a holiday sales call.

By that point it became clear, said several members of the industry, that someone on the executive team would have to take the fall.

And while Toys "R" Us was able to pepper disappointing results with several positives, such as a year-to-date increase in core toys sales, nothing could mask the impact the season would have on earnings.

"Clearly, the shortfall in the sales performance of our U.S. toy stores during the holiday selling period will have an attendant impact on earnings," Eyler told investors and analysts in January. "While we do not expect to meet current consensus estimates of $1.13 per share for the full 2002, we do expect an increase in earnings per share for the full year."

Staley, a 13-year veteran of Toys "R" Us, was credited by Eyler for being an important contributor to the company's Mission Possible store concept and redesign that was completed fully in 2002.

"Now that the complexity of the remodeling is over, perhaps a new executive with a different skill set is needed," said Margaret Whitfield, a retail analyst with Brean Murray

That skill set, said several analysts and suppliers, needs to be the product of a solid retail background.

All agree the position of president is a hard one to fill. Ideally, it requires sharpness and strength in every aspect of retail--from merchandising to finance. "It needs to be someone who knows how to generate traffic and excitement in the stores," said Whitfield.

That said, several have speculated Toys "R" Us would be best served by recruiting a replacement from the executive ranks of one of the discounters, such as Target or Wal-Mart, or fellow hardlines retailer Best Buy

Given the fraternal nature of the toy industry, others have named David Niggli, evp, merchandising, for FAO Inc., and president and cmo at FAO Schwarz, as a possibility. Also a possibility is Toys "R" Us' own Jim Feldt, evp and president of merchandising and marketing. But despite their years of experience, others counter, the two men are primarily merchandisers and therefore not the right fit for the job.

Should Toys "R" Us look to recruit talent from within, John Barbour's resume may very well top the stack of possibilities placed on Eyler's desk.

As part of the January 2002 restructuring of corporate hierarchy, Barbour assumed the role of president of Toys "R" Us International, a position once occupied by Staley. Frequently praised for his talent by vendors, Barbour has nearly 20 years of executive experience in the toy industry and initiated the formation of Toysrus.com's alliance with Amazon.com, a union that proved to be one of the much-needed bright spots for Toys "R" Us this holiday. Sales at Toysrus.com well outpaced the chain's total 2% increase last holiday, rising 12% to $179 million from $159 million last year, and 24% to $326 million on a year-to-date basis from $263 million.

With Staley gone and a search for a replacement underway, Toys "R" Us as a company is showing investors it is taking steps to right the wrongs of its past, said one toy supplier.

While a wave of upsets in the retail industry did well to undermine investor confidence in 2002 (leaving behind a hypersensitivity to change), vendors expect their business with Toys "R" Us to continue as usual.