The decrease of birthrates in countries where we operate could negatively affect our business. Most of our end-customers are newborns and children and, as a result, our revenue are dependent on the birthrates in countries where we operate. In recent years, many countries’ birthrates have dropped or stagnated as their population ages, and education and income levels increase. A continued and significant decline in the number of newborns and children in these countries could have a material adverse effect on our operating results.
It may not have been the biggest existential threat confronting Geoffrey the Giraffe (the store’s mascot), but it’s the one with the broadest implications outside of the worlds of toys and malls.
Measured as a share of overall population, U.S. births have fallen steadily since the Great Recession. They hit their lowest point on record in 2016 — the most recent year for which the Centers for Disease Control and Prevention has comparable data.
Even adjusted for the aging population and declining share of women of childbearing age, U.S. fertility rates are at all-time lows.
That’s problematic for Toys R Us, which also operates the Babies R Us stores. The company claims in its annual report that its income is linked to birthrates, and it appears to be right.