Toys R Us auditors cast doubt on toy chain’s future after sales slump
Auditors of Toys R Us have cast doubts on the toy store chain’s future after it posted a slump in half-year sales.
The company reported sales of just $3.1 million in the six months to the end of January, compared with the $5.9m a year ago, according to newly filed accounts to the Australian Securities Exchange.
The amount the company owed also exceeded its total assets by $12.8m, which auditor RSM Australia Partners said indicated “a material uncertainty which may cast significant doubt as to whether the group will continue as a going concern”.
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Toys R Us re-launched online in late 2019 after reaching a deal with Hobby Warehouse. In 2021, it was bought by ASX-listed retailer Funtastic, which changed its name to Toys R Us the same year.
Toys R Us’ financial results came just over a month after chief executive Penny Cox resigned, with chair Kelly Humphreys assuming the role of executive chair temporarily.
Ms Cox told The Nightly three months after stepping into the CEO role in August 2023 she was focused on reminding customers of Toys R Us’ presence in Australia and eventually bring back brick and mortar stores.
“I have a lot of work to do on the awareness side . . . it’s a slow comeback into the market, eventually we want to develop into more physical retail,” she said at the time.
But Toys R Us has struggled to break through a crowded market dominated by domestic and international players, like Amazon, Kmart and Big W, as well as independent toy chains.
Toys R Us directors have concluded the group would have sufficient cash to support its operations going forward because it could still draw an extra $1.22m from New York-based investment management firm Mercer Street Capital Partners, which had extended a $5m line of credit.
The directors are currently in negotiations with its existing lenders to restructure the terms of the loan.
The latest accounts showed Toys R Us has narrowed its loss to $700,000 from $9.6m in 2024. It also said it had about $2.7m returned after transferring leases on two warehouses in Clayton Victoria.
Shares in Toys R Us — with a market capitalisation of just over $5m — last traded at 3.5¢.
