Toys R Us collapse likely to impact Birmingham supplier Tandem
Toys and bikes supplier, Tandem Group, has warned shareholders the fragile nature of the retail sector and the collapse of the Toys R Us chain are likely to have an adverse impact on its revenues.
The Birmingham-based firm, which designs, develops, distributes and sells sports, leisure and mobility equipment, used a trading update ahead of its annual results statement to highlight the issue.
It said it had become concerned about Toys R Us, one of its major customers, last year and had implemented steps to limit any long-term risk.
The alarm bells first began ringing when Toys R Us’ US parent company filed for Chapter 11 bankruptcy protection in the United States and Canada.
“We considered this course of action concerning, and prudently decided that we would no longer trade with them until the position was rectified,” said Tandem.
“Subsequent to this, the UK company entered administration on February 28. Consequently, although we have no outstanding debtors balance, this has and will continue to have an adverse impact on revenue.”
It isn’t just the fragile position of Toys R Us that is giving cause for concern.
In its outlook for the current year, it states: “We have some concerns about the levels of stock some of our national retailer customers are carrying forward from the prior year in both toys and outdoor product categories and we expect this to have a negative impact on performance of the group in the first quarter of the year. Consequently, revenue to date and our forward order book are currently behind the previous year.”
The announcement is likely to take some of the gloss off relatively positive figures for 2017 that show despite a 4% reduction in turnover to £36.8m, the group’s net profit for the year is expected to be significantly ahead of the prior year.
It said although the cost control measures taken to streamline bicycle operations brought about an expected reduction in turnover, this had enabled a positive impact on profitability.
Toy sales were broadly flat compared to the prior year. However, it said this was a strong result against a backdrop of a reported decline in revenues in the UK outdoor toy market of 6% in 2017.
Overall, it said: “We are cautious about the outlook for the year ahead, but we remain confident that we have the resources and personnel to deliver profitability to our shareholders.”