Toys 'R' Us Asia just wants to grow up

Singapore

PRIVATELY-held Fung Retailing has upped its stake in Toys "R" Us Asia to 21 per cent, while note holders of the erstwhile parent have swopped debt for a 79 per cent stake in the business.

But this does not mean an initial public offering (IPO) is in the cards just yet, chief executive and president Andre Javes said at a press conference on Monday, while emphasising that the group has consistent growth and is "in investment phase".

The regional business is ramping up investments - including store and e-commerce growth, data analytics and hiring - after last week's divorce from the beleaguered US-based Toys "R" Us Inc, which filed for bankruptcy protection in September last year.

Mr Javes said: "The changes are at the shareholding level, not at the operational level of the company. We don't envisage major structural changes out in the various marketplaces. We do have a number of functions that, as we become a complete standalone entity, we will be looking to add ... but these are minor."

On the new investors - mostly US-based financial institutions and funds - he said: "These companies have done their due diligence on our company. They're excited. Why? Because we're a company that is and has been growing consistently, for the last 10 years. Certainly, our growth has been exponential in the last five."

The management would not disclose the share of contributions from operations here. But corporate records show that Toys "R" Us (Singapore) reported S$8,047,818 in post-tax profit for the year to Dec 31, 2017, up by 32.8 per cent on the previous year, on S$77,245,219 in revenue.

Raymond Burt, Toys "R" Us Asia's Singapore-based group country director for South-east Asia, echoed the group's statements on how the United States bankruptcy saga had "contamination" effects globally.

"Some of our partners - which would be our vendors - probably got a little bit nervous, and landlords, potentially. And customers - I'm sure there's a group of customers out there who are concerned," he said.

But when asked, he added that the impact has not been material.

Toys "R" Us has more than 500 stores across Asia, including franchisees in the Philippines and Macau.

Mr Javes said the stores in Asia fared better than their now-shuttered American brethren because of significant differences in the business model, such as smaller outlets that are located within malls and not as standalone units, as well as a retail calendar with year-round events instead of a Christmastide crunch.

As for IPO plans under the new ownership, Mr Javes said in reply that "my answer at this point is no".

"But, you know, the caveat there is that this a decision that the board would make further down the track.

"At this point in time, there's no discussion with regard to the board in terms of considering an IPO."

The same goes for the rights to the Toys "R" Us brand name, a licence Mr Javes noted that the Asia business holds for the next two decades.

Toys "R" Us Inc's intellectual property holding company announced last month that it would sell its assets to a group led by its secured lenders, after it failed to find comparable bids.

So, Geoffrey, LLC "would continue to run the brand as they have previously", Mr Javes told reporters. "That means no change for us at all."

He maintained: "The separation from our previous parent company, Toys 'R' Us Inc, means that our current shareholders - both Fung Retailing and the Taj note holders - are focused on and interested in only one thing: the development and growth of Toys 'R' Us Asia within our countries."

Fung Retailing is part of Hong Kong's privately held Fung Group conglomerate, which also has publicly listed arms, such as Li & Fung.