Toys "R" Us Inc. appointed a new chief executive with little
retailing experience but a track record of taking companies
public.
David Brandon, the former CEO of Domino's Pizza and Valassis
Communications Inc., will become chairman and CEO of the big box
toy retailer on July 1. The appointment could point the way to an
eventual exit for the three private-equity firms that bought Toys
"R" Us for $6.6 billion before the financial crisis, but have been
stuck there as the company's weak financial performance made a
public offering unlikely.
Bain Capital Partners LLC, KKR & Co. and Vornado Realty
Trust bought the company in 2005 and had hoped to exit the
investment with an initial public offering a few years ago, but
they disagreed over exact timing, and then the window closed,
people familiar with the situation have said.
Mr. Brandon, 63 years old, will join the company as its
financials are improving. Toys "R" Us swung to a fourth quarter
profit after doing a better job with pricing and promotions during
the crucial holiday season, narrowing its full-year loss to $292
million from $1.04 billion a year earlier. Sales for the full year
fell slightly to $12.4 billion, from $12.5 billion a year
earlier.
The incoming CEO is a known quantity to Toys "R" Us's private
equity owners. Mr. Brandon joined Domino's in 1999 when it was
owned by Bain Capital, then took the company public in 2004. Before
that he had spent 20 years at direct mail company Valassis, the
last 10 of which as CEO. He took that company public in 1992.
"In many cases, they are similar situations," Mr. Brandon said
of Dominos and Toys "R" Us. "They are both great global
brands."
Mr. Brandon acknowledged that at some point the private equity
owners will seek to exit the business, but said there was no
immediate plan to do so. "The focus now is on execution,
performance and growth," he said. "If we stay focused, the
ownership situation will resolve itself."
The new CEO stepped down at Dominos in 2010 to become the
director of Intercollegiate Athletics for his alma mater, the
University of Michigan. He left that post in October.
At Toys "R" Us, Mr. Brandon will replace a longtime company
executive Antonio Urcelay, who will retire. Mr. Urcelay was named
CEO in 2013 following the departure of Gerald Storch, who had led
the company for years. Mr. Urcelay put in place a plan that
executives internally call "fit for growth" that emphasizes doing a
better job with the basic blocking and tackling of retailing, which
appears to be delivering some results.
Mr. Brandon said he planned to continue with many of those
initiatives. "The company needs to put itself in a position where
it can complete globally," he said. "It's about performance and
execution."
He said he isn't bothered that he is coming to the
hypercompetitive business of selling toys with little retailing
experience.
"When I got to Domino's, I wasn't a pizza guy either," Mr.
Brandon said. "There is a huge advantage for a leader to come into
a situation with a new set of eyes and challenge the status
quo."
Mr. Brandon pioneered digital ordering at Domino's. When he
joined the company in 1999, 90% of orders were taken over the
phone, he said. Today, 50% of orders are done digitally via a
mobile phone or the Internet.
"Customers want it when they want it and how they want it," he
said, referring to the upheaval that e-commerce has brought to
shopping habits. "I've been through that transformation in one
industry and think I could bring experience that could be
helpful."
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
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