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Toy firm withdraws IPO plan amid lower sales
March 31, 2013
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NEW YORK: Toys R Us Inc., which had filed plans to sell shares to the public in 2010, said on Friday that it’s withdrawing its plan as the company reported declining sales and profit last year.

The company, which was taken private in 2005 through a $6.6 billion buyout deal, blamed “unfavorable market conditions” and its recently announced “executive leadership transition,” for the decision, which it announced in a regulatory filing with the US Securities and Exchange Commission.
 
Chief Executive Gerald Storch, a former Target Corp. executive who has served as the toy retailer’s CEO since 2006, said last month he’s stepping down, even though he’ll remain as chairman.The IPO withdrawal came as the company’s international profit last year was hurt by “challenging global economic conditions,” particularly in Europe and Japan, the company said Friday. Meanwhile, costs to refinance its debt also ate into profit.

The company’s fourth-quarter sales in its critical holiday quarter, which alone made up more than two-fifths of its total, dropped 2.6 per cent to $5.77 billion. Profit in the quarter ended Feb. 2 slumped 30 per cent to $239 million as the company saw a 35 per cent jump in interest expense.

Fourth-quarter comparable sales in the US fell 4.5 per cent, hurt by an 11 per cent drop in demand for electronics, videogame consoles and software and other items in the company’s entertainment category.

Overseas same-store sales, which strip out results from new and closed stores, fell 5.4 per cent.

While Storch has been praised for initiatives including making right inventory bets on popular toys, unveiling more exclusive products or touting its wide assortment at Toys R Us, the company is still weighed down by price competition from online retailers led by Amazon.com Inc. while larger brick and mortar retailers from Target Corp. and Wal-Mart Stores Inc. routinely use toys as the loss leaders to drive holiday traffic, analysts have said. Meanwhile, Amazon.com Inc., which started as an online bookseller before becoming the e-commerce behemoth it is today, is buying book-recommendations site Goodreads.

Amazon announced the deal Thursday. The purchase price was not disclosed.

Goodreads, a San Francisco company, launched in 2007. On the website, members can list, rate and review books they’ve read and discover new books by using the site’s recommendation tool.

It’s also become a social network for avid readers: Members can see what their friends are reading and comment on their reviews, and join online discussions on books they’ve read.

Despite offering “Earth’s biggest selection,” Amazon has long had an interest in books. The Seattle company was founded in 1994 as an Internet bookseller and expanded its presence in the reading world when it introduced the Kindle e-reader.

That shared interest for “reinventing reading” made the deal a good fit, said Russ Grandinetti, Amazon’s vice president of Kindle content.

“Goodreads has helped change how we discover and discuss books and, with Kindle, Amazon has helped expand reading around the world,” Grandinetti said. “In addition, both Amazon and Goodreads have helped thousands of authors reach a wider audience and make a better living at their craft. Together we intend to build many new ways to delight readers and authors alike.”

Goodreads has more than 16 million members who have added more than 530 million books to their digital shelves and written 23 million reviews. There are more than 30,000 book clubs on the site.

In a blog post on Goodreads’ website Thursday, co-founder and Chief Executive Otis Chandler (and grandson of former Los Angeles Times publisher Otis Chandler) called Amazon a “perfect partner” whose reach and resources would help his company “create an even better experience” for members. “For all of you Kindle readers, there’s obviously an extra bonus in this announcement. You’ve asked us for a long time to be able to integrate your Kindle and Goodreads experiences. Making that option a reality is one of our top priorities,” Chandler said.

The acquisition is expected to close in the second quarter. Goodreads will continue to be based in San Francisco, and Chandler said members’ reviews and ratings will remain on the Goodreads site.

“Amazon supports us continuing to grow our vision as an independent entity, under the Goodreads brand and with our unique culture,” he said.

MCT

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