Toys R Us Inc said on Wednesday that Gerald Storch will step down as its chief executive, just weeks after the world's largest dedicated toy retailer reported disappointing results for the all-important holiday season.
The news added to doubts about the retailer's chances to return to being a public company this year, after filing for an initial public offering in May 2010.
The company, which saw its U.S. sales fall during the holiday season, said it will start a search for a successor. Storch, 56, will remain chairman of the board.
"There was a lot of pressure on him, there was a lot of finger-pointing. 'How did he mess up 2011? Why wasn't 2012 better?'," a source familiar with the matter said.
Toys R Us first went public in April 1978 and operated as a public company until July 2005, when it was taken private by KKR & Co LP , Bain Capital and Vornado Realty Trust in a $6.6 billion deal.
While the company's results were far better when it was originally considering an IPO, some of the owners thought they would be able to raise more if they waited, the source familiar with the matter said.
But the results have lagged expectations since then.
"Everything subsequent to the decision not to go (public) at that time, you could probably say was the result of operation," the source said.
The New Jersey-based retailer's chances of going public this year are very small, two sources told Reuters this week.
"What will require (for a Toys R Us IPO in the future) is the owners to take a more conservative view of what the value of the company is," one of those sources said.
Toys R Us spokeswoman Kathleen Waugh declined comment on the IPO and did not give any more information on the CEO search. She said Storch was not available for an interview on Wednesday.
A former Target executive, Storch joined Toys R Us in 2006. While Storch has been credited for boosting the toy retailer's e-commerce business, the company operates in a tough industry where it competes against Wal-Mart Stores and Amazon.com .
DEPARTURE FOLLOWS TOUGH YEAR
In 2012, toy sales fell 3.5 percent to $20.47 billion in the United States, the world's largest toy market, according to research firm NPD Group.
Toys R Us previously said that its same-store sales in the United States fell 4.5 percent in the nine weeks from October 28 to December 29, a key time for sales of toys. Its total sales fell 4.7 percent during that period.
Toys R Us has not yet reported results for its latest fiscal year. In the year that ended in January 2012, same-store sales fell both at home and in the international business, while total sales rose $45 million to $13.9 billion.
During Storch's tenure, Toys R Us took over running its Toysrus.com web site, after the site was run by Amazon. It also bought other web sites, such as Toys.com, as well as the KB Toys brand and the FAO Schwarz chain.
Toys R Us operates stores under its namesake brand and the Babies R Us and FAO Schwarz names.
(Reporting By Dhanya Skariachan and Olivia Oran, writing by Jessica Wohl; Editing by Chris Reese, Leslie Gevirtz and Nick Zieminski)