The filing of its accounts confirmed last week that Smyths Toys is already making a financial return on its deal last year to acquire the central European operations of Toys R Us.
The family-owned group is now – individually and collectively – profitable in Ireland, the UK, Germany, Austria and Switzerland. That surely makes Smyths the most successful ever Irish retailer abroad.
The two biggest indigenous Irish grocers, Dunnes Stores and Musgrave, are larger, more storied, family-owned operations than Smyths. Yet the toy retailer has succeeded abroad where they have failed.
Dunnes and Musgrave both have operations in Spain, but in recent years both effectively abandoned their forays into Britain.
Smyths, meanwhile, has completely conquered the British market, opening more than 100 large retail outlets there in a little over a decade, vanquishing its specialist rivals. Its UK sales are now about €675 million.
Its prospects for maintaining growth in Britain are likely to slow as Brexit keeps sterling weakened, and Smyths runs out of unserviced locations to open new stores. As it already dominates the specialist Irish toys market, Smyths’ most obvious avenue for further growth became Europe.
The global insolvency last year of Toys R Us provided Smyths with a golden opportunity to buy out of bankruptcy the German-Swiss-Austrian stores of its US rival. The accounts filed last Friday show it paid less than €62 million to gain control of more than 90 outlets, which made Smyths profits of almost €14 million in 2018.
As it fine tunes them to better fit its sophisticated big box retailing model, their financial contribution may improve further.
The wider Smyths group is now on course for annual sales of close to €1.4 billion. Despite the success of its foreign forays, the group still made an annual profit of just €36 million.
With margins of less than 3 per cent, Smyths may be tempted to expand its footprint even further if it wants to keep growing profits in years to come.
