John Eyler Jr., Chairman and CEO of Toys "R" Us

This is a partial transcript from Your World with Neil Cavuto, November 17, 2003, that was edited for clarity.

Watch Your World w/Cavuto weekdays at 4 p.m. and 1 a.m. ET.

BRENDA BUTTNER, HOST: Toys "R" Us, the number two retailer behind Wal-Mart, posting a loss that was twice what Wall Street was expecting. Sales inching higher by two percent. Toys "R" Us is also scaling back its earnings outlook for the year. It plans to close 182 of its Kids "R" Us and Imaginarium stores. The stock taking a hit, dropping more than 12 percent.

So, can the head of Toys "R" Us turn things around? Let’s ask John Eyler, Toys "R" Us chairman and CEO. Thanks for joining us.


BUTTNER: Well, it was tough quarter.

EYLER: Well, the quarter wasn’t as tough as the topline numbers would show, because with the accounting change it made it look like we actually lost more money this year in the third quarter than we did last year. And actually, if you take out accounting EITF-216, our earnings were flat for the quarter, up 10 cents a share year to date. So not as difficult as a lot of people are reporting.

BUTTNER: Yes, but Wal-Mart and Target, they’re kind of eating your lunch.

EYLER: You know what? Wal-Mart and Target are formidable competitors. But in the last three years, Wal-Mart Target an Toys "R" Us have all increased market share simultaneously.

And I think it’s becoming clear that we’re moving toward a structure in many businesses where there will be a Wal-Mart, a Target and an independent specialty store, whether it is Bed Bath & Beyond and Linens, whether it’s Best Buy, whether it’s Toys "R" Us. That three national player structure seems to be forming in many businesses, and we are the logical player because we are a very large toy seller.

BUTTNER: Well, I think I single-handedly am keeping you afloat. But last month, investors are just not convinced. Today, you took a big hit; last month, you lost 10 percent alone. It has been tough.

EYLER: We lost 10 percent of what?

BUTTNER: In share price.

EYLER: Oh, well we have been all over the lot this year. We started the year at $10 a share. In February, we were at about $7.70. We peaked at $14 a few weeks ago.

This is a stock that actually migrates quite a bit, especially as we come into the holiday season, because in the toy part of our business it is very holiday-sensitive, although it’s not in the babies portion. And generally speaking, if you watch our stock, you’ll see that kind of volatility as we come into the holiday season.

BUTTNER: Are you going to be able to cut your prices enough to compete with the Wal-Marts?

EYLER: Well, you know, last year, we took all of the best-selling products and we essentially matched Wal-Mart and Target’s prices throughout the holiday season last year. We were able to offset that on a margin basis by expanding the exclusive products to almost 20 percent of our business. So we did that last year and we are annualizing it this year.

While Wal-Mart went down in prices earlier than they ever had into early October, we long since have matched that. I assume that Target has done the same. So, the real issue for a consumer and the real issue for our business, is not really price. The real issue is going to be who has the stock as you get into the month of December, as you get into the last couple of weeks.


EYLER: And we have improved our systems and we have the talent in our company that we’ll be in stock on the most wanted products all the way through the holiday. And I think that is a real competitive advantage for us.

BUTTNER: In the "what were you thinking" department, when you had Jeffrey inhaling from a balloon...

EYLER: Actually, he wasn’t. Jeffrey was in a balloon, but he was so tall that his head came up inside the balloon and he got a whiff of the helium. And that offended some people, and we understand that.

BUTTNER: OK. So a turnaround? You’re going to come through in Christmas?

EYLER: Well, I’ll tell you, we have been working hard four years to rebuild the basic structure of this company. And Kids "R" Us and the free- standing Imaginarium stores really have been on a very negative trend. And so I think we’re solidly positioned for the future.

BUTTNER: OK. All right. Thank you, sir.

EYLER: Thank you.

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