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Peter Lynch

Toys R Us
NASDAQ:TOYS
1978-1985
Industry: Toy Retailer
Category: Low Cost Provider

Context
Lynch received the idea from Peter deRoetth.

Why the Company is Mispriced
Company was spun out of of a bankrupt company, Interstate Departments Stores.

Alternative View
Simply the company knew how to sell toys.
The company was a discount retailer - large formats, lots of inventory, promise of low margins.
The company was the lowest-cost provider with no copycat competition.
The large inventory also made it the center for toys.
They had to formula to sell toys.

Result
Lynch made 5x his money, but regrets not making 25x.
He sold because a Milton Petrie, a retail expert, had bought 20% of Toys R Us, pushing the stock higher when he was buying.
Lynch sold because he assumed the stock would go down after Petrie stopped buying.
He regrets selling because he found the right stock, all the evidence is telling him it's going higher, everything is working in his direction.
Finding something this strong is not a regular occurrence.

Notably
Lynch says research is what helps you sort out Toys R Us from Coleco, Child World, and Greenman Brothers.

Notably, Toys R Us went Chapter 11 bankrupt in 2017.
The failure can be attributed to online shopping, phones/iPads, and competition from Walmart/Target,
But really the failure really comes off the back of LBO debt and the company not re-imagining itself in an evolving world.
Example: Instead of developing their internet presence, Toys R Us entered a 10-year partnership with Amazon in 2000, to make Amazon the exclusive seller of their toys.