Us says sayonara to Benchmark

Us says sayonara to Benchmark

In an announcement today, the toy retail giant confirmed what had been suspected since last week. The announcement was buried in a second quarter earnings press release. For the second fiscal quarter 2000, Toys "R" Us reported that it has sales of $2.2 billion, up from $2 billion for www.cametleon.fr the same period last year. Net income for the second quarter last year was $16 million or six cents a share.The break up of the Toys "R" Us/Benchmark effort may well just be the tip of the iceberg. According to Tucker Cleary retail analyst Margaret Whitfield, Toys "R" Us could lose as much as 15 cents a share for this fiscal year in web related expenses. That translates into $58 million in losses, she estimates. Unconfirmed reports say that Benchmark Capital pumped in about $10 million into the company, in exchange for about 15% to 20% of the joint venture. The alliance created a lot of noise, and publicity at the time, with Benchmark partners boasting that about a dozen large offline retailers for joint ventures had also approached them for similar ventures.Sources familiar with Toys "R" Us say that the alliance fell apart because of corporate politics and a culture clash. Bob Moog, who was named CEO of the web subsidiary, quit in mid July. John Barbour formerly of, has stepped in."It's just August, and there is such chaos at the company. You can pretty much write off this Christmas season from an e www.rocroy-svp.fr commerce perspective," says Whitfield. Since then eToys shares have climbed back up to $37 a share.The Santa Monica, Calif, based eToys however has nothing to worry about, according to Peter Caruso, retail analyst for brokerage Merrill Lynch. In a recent note to his clients, Caruso wrote that since eToys has signed up withas an anchor tenant, the company has a competitive advantage over Toys "R" Us.The two, however have more competition in the cards.of Seattle has already moved into the online toy retail business. In addition, www.marieclairedanen.fr Mattel plans to have a significant web presence. Finally,could enter the online category as wellIn plain English, competition, both online and physical, will be fierce, especially in the fourth quarter of 1999. The fourth quarter generally represents about half of the year's toy sales, or around $10 billion, in an industry which is about $21 billion, and shows very little growth in the range of 2% to 3% every year.The question is what share of toy sales will take place on the Internet this Christmas? Last year the total online toy sales were less than $30 million (of which eToys has $22 million.) Taking into account the forecast for this year, the total online toy sales in the fourth quarter could come to about $300 million. Caruso thinks given the competitive nature of the online toy retail business, Toys "R" Us should have been more aggressive in acquiring the prime space on AOL.Against this backdrop, one wonders how Toys "R" Us chief executive Robert Nakasone will meet his target of making the offline giant into a online superpower by the end of this year.