Updated from 8:56 a.m. EST
Toys R Us
fell after announcing the appointment of a new president and chief executive Tuesday, poaching John Eyler from rival
Toys R Us stock was down 3/4, or 6%, to 11 7/8 in midday trading Tuesday. (It closed Tuesday down 1 1/16, or 8.42%, at 11 9/16.)
Eyler, 52, has been chairman and chief executive of F.A.O. Schwarz, a division of
of Amsterdam, since 1992 and will take up his new post on Jan. 17. Some analysts believe the share price is down because Eyler is "not well known. It's not like hiring a megastar," said Margaret Gilliam of research house
Gilliam & Co.
Her firm does not rate or underwrite companies.
"He may have the reputation of working with losing companies," she added. Though F.A.O. is a phenomenal marketing success, shrinking profits and several quarters of operating losses have hit the company. Before joining F.A.O., he was chief executive for three years of
specialty men's clothing stores, which Gilliam cites as "a lost cause," in Chicago. Before that, he was chairman and chief executive for six years of
, a family apparel unit of
Federated Department Stores
that was later disbanded. He was also with
May Department Stores
for 12 years from 1979 until 1983.
However, other analysts think the shares fell steadily all day because they've been down for so long. "The stock has obviously been experiencing secular weakness for 10 years," said analyst Peter Caruso of
. (He rates Toys R Us a neutral and his firm has done no underwriting for the company.)
Shares of the company have ailed of late, falling more than 25% in the past 12 months. In addition, last week Toys R Us reported disastrous same-store sales for December, during a holiday season that was deemed the strongest in a decade by some analysts. For the nine weeks ended Jan. 1, same-store sales were down 2%, with total sales flat at $4.4 billion in both 1999 and 1998.
"He needs to maintain pricing parity with the mass merchandisers, while enhancing customer service and improving the selection of toys," said analyst Margaret Whitfield of
Tucker Anthony Cleary Gull
, of how Eyler needs to improve the bricks-and-mortar business.
The company has been bereft of permanent leadership for the last five months. Michael Goldstein, chairman of Toys R Us, had been acting as chief executive since Robert Nakasone resigned under pressure from the board last August after only a year and a half in the job. His departure came just five months after Bruce Krysiak, then president and chief operating officer, stepped down just one year into the job. Toys R Us' president for merchandising and manufacturing as well as the executive in charge of
have left the toy company recently.
Eyler is highly regarded as someone who ably enhanced the shopping experience at F.A.O. Though F.A.O. appeals to a more upmarket clientele than Toys R Us, Eyler "has a strong understanding of the toy channel," Whitfield said. "Many toys are the same in both stores, with just a different price structure." She rates Toys R Us a hold and her firm has done no underwriting for the company.
"I look forward to working with the Toys R Us family to help the company reach its potential of being the premier retailer for toys and children's products," Eyler said in a statement that seemed to acknowledge the bruising the company's taken from
, which has succeeded in taking considerable market share from the Paramus, N.J.-based toy retailer. In 1998, Wal-Mart surpassed Toys R Us as the top retailer of toys.
Toys R Us "is a company that's getting itself back into a position where it becomes a toy store again," said analyst John Taylor of
. "It got itself into a position several years ago where it was more interested in managing relationships with its vendors than in acquiring toys people were interested in buying." He rates Toys R Us a buy and his firm does not do underwriting.
Meanwhile, the Toysrus.com business endured well-publicized problems over the holidays as well, with consumers experiencing difficulty accessing the site and receiving deliveries on time. "A lot of consumers were disappointed and it's unclear whether they will be back this year," Whitfield noted.
Despite that, the company shipped $39 million in goods sold over the Internet and ranked fifth in
ranking of the top 25 e-commerce sites for the holiday shopping season, behind
Whitfield also hopes that "now that there's actually somebody at the top, he will take the necessary actions to enhance shareholder value." That includes the potential spinoffs of
Toys R Us Japan
(which could happen this year), Toysrus.com and
Babies R Us
, which Whitfield considers the "crown jewel" of the company.
"Though the company's made many strategic changes, the earnings results still speak for themselves," said Caruso. "They've yet to hit the right formula." But it's not all doom and gloom for Toys R Us. "The power of franchise still exists," Caruso added.