A Report on Management Accounting Issues for Toys R Us

This report examines the management accounting issues faced by Toys R Us, a once-dominant international retailer of toys and baby products. The analysis delves into the company's struggles, including the closure of stores in Australia, the UK, and the US. The report highlights key factors contributing to Toys R Us's failure, such as the shift in consumer behavior, the rise of online retail, and the inability to adapt to changing market dynamics. It explores issues like out-of-town store locations, the changing preferences of children for technology and experiences over traditional toys, and the company's struggles to compete on price and innovation. The report emphasizes the need for Toys R Us to restructure, reduce overhead costs, and embrace online business strategies to regain market leadership, focusing on children's experiences rather than just product possession. The document concludes by referencing relevant sources for further reading.

Running Head: MANAGEMENT ACCOUNTING
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Name of the Student
Name of the University
Author Note

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Table of Contents
Memorandum.............................................................................................................................2
Reference....................................................................................................................................6

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Memorandum
To: Board of Directors
From:
CC:
Date:
Subject: Management Issues of Toys R Us
The analysis of management issues are done for assisting board of directors of Toys R Us
stores for focusing on the organizational operations. The issues of management accounting
assist the management of company for using accounting information provisions. It helps to
provide better information to management in order to decide concerns and matters that are
within the company to aid organizational performance and managerial functions. The article
published on June 21, 2018 has highlighted some of the serious managerial issues concern
faced by Toys R Us (Toysrus.com. 2020).
Toys R Us is the international clothing, toy and retailer of baby product that is owned by the
Tru Kinds and others. It is the clothing retail company, which was founded in year 1948 by
Charles Lazarus. The company’s headquarter is located in Wayne, New Jersey. Further, it
operates in 35 countries over 1,500 stores and jurisdictions around world is under FAO
Schwarz banners, Babies R Us and Toys R Us. Under these locations, apparel of children,
baby merchandise, educational products and toys are sold. The company was acquired by
Vornado Realty, Bain Capital and Kohlberg Kravis Roberts, who took it private in year 2005.
The product offered by the company includes dolls, vehicles, role-paly toys, video game
software and the related accessories. The Toys R Us serves their customers in United States.

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The article published in relation to Toys R Us has highlighted concerns relating to closing
down of the company (Christ and Burritt 2017). The stores Babies R Us and Toys R Us
across the Australia will get shut down after local administration of company has said that
they were not able to find buyer for the embattled brand. The first store of Toys R Us was
opened in the Australia in year 1993. The Australian arm of the US chain has forty four stores
all across the country, in which it has around 700 people. The closures of the stores in
Australia will follow collapse of brand Toys R Us in UK and in US. In Australia, the mortar
and bricks specialty stores like Toys R Us have been struggling for competing with the online
sites of retail. However, the company have been also fighting the uphill battle against the
retailers of bigger domestic supermarket style such as Big W and K-Mart, which sell mixed
product ranges for the adults and children. Likewise, same is happening to the retailers of
high street in UK, where in February, Toys R US has went into the administration. On April
24, 2018, the last store of Toys R US was closed (BBC News. 2020).
The situation in US for Toys R US has been similar for the several years as the stores of
bricks and mortar struggles for competing against Amazon and among the other online
retailers. Even though, Toys R Us in the US has sought protection of bankruptcy last year in
September by the month of May, the company has announced for selling or closing around
885 stores after it has failed to find the buyer for their business. The website of US has been
shut down and there are still some store operating in the US but they are holding to close
down the sales (Jamil et al. 2015).
The UK arm of retailer- Toys R Us has went into the administration, which has put almost
thousands of the jobs at risks. Following are the reasons that are responsible for failure of the
Toys R Us:

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 Out of Town: During 1950s America, when the retail took off as activity of leisure
and the baby-boomers were in short trousers and pushchairs, there was right time for
company to overwhelm the children with the wealth of choice. During 1990s, mode
has still worked for the shoppers of UK for picking up latest Tamagotchi, Power
Ranger and Furby. At that particular time, cheaper out of the town real estate with the
purpose-built free parking, in addition to places to eat has offered easy weekend day
out. However, during these days, out-of-town means out-of-the-sight in comparison to
the rival outlets (Fullerton, Kennedy and Widener 2014).
 New Kids on Block: The mindset of kids are changing. It is seen that even eight year
old child can download the app in less than 30 seconds for distorting their face and
making them look like Spiderman. The presents of birthday are now technology
related, for example drones, go-pro cameras or virtual reality headsets. Children seeks
towards getting experiences in comparison to possessions. Toys R Us was not able to
get into it very successfully. The company has failed in changing itself, with the
change in the environment (Van der Stede 2015).
 Priced Out: In case of toys, the brand loyalty is to manufacturer. If someone wants to
purchase box of Barbie doll, Playmobil or the set of Scalextric, it does not matter
from whom it is purchased from. Hawkins Bazaar, Woolworths and Hamleys, all of
these companies have suffered from onslaught of the internet shopping supermarkets
and discounters before them. However, Toys R Us did not have learned from these
examples (Alsharari, Dixon and Accounting 2015).
 Lack of Imagination: For having magical place, it is not necessary to be quite
magical. If someone cannot compete on the prices than at least they should compete
on theatre. The trip to the store of Toys R Us was lacking in the inspiration and it was

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mundane. One of the major problem was that stores of Toys R US are too big and are
unwelcoming (Otley 2016).
 Lack of Drama: Toys R Us was required to do something, they were required to
update for what they were offering. Further, cartoon character- Geoffrey the giraffe of
1990s on the logo of company should have long ago gone. They should have put the
experiences of children on centre and front. The demise of Toys R Us was dynamic as
they were not dynamic enough. They should have put more efforts on keeping their
customers happy, more on trend and having less functional (Kaplan and Atkinson
2015).
Hence, the company Toys R Us requires to restructure themselves in order to again stand in
the market and become leader. This can be possible by focusing on the experiences of
children rather than possession. For this, they are required to decrease their overhead costs
and restructure their business as per the market demand. They should also indulge in the
online business.
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Reference
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BBC News. 2020. Toys R Us to close down in Australia. [online] Available at:
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Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm
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Otley, D., 2016. The contingency theory of management accounting and control: 1980–
2014. Management accounting research, 31, pp.45-62.
Toysrus.com. 2020. Toysrus.com, The Official Toys”R”Us Site - Toys, Games, & More.
[online] Available at: https://www.toysrus.com/ [Accessed 23 Jan. 2020].
Van der Stede, W.A., 2015. Management accounting: Where from, where now, where
to?. Journal of Management Accounting Research, 27(1), pp.171-176.