Another giant of retail has announced it is shutting its doors.
https://www.washingtonpost.com/news/business/wp/2018/03/14/toys-r-us-to-close-all-800-of-its-u-s-stores/?utm_term=.df4f982bed25
Toy store chain Toys R Us is planning to sell or close all 800 of its U.S. stores, affecting as many as 33,000 jobs as the company winds down its operations after six decades, according to a source familiar with the matter.
A group of toy makers led by MGA Entertainment, the giant behind brands such as L.O.L. Surprise!, Little Tikes and Bratz on Wednesday submitted a bid to buy Toys R Us’s Canadian arm, which includes 82 stores, according to Isaac Larian, MGA’s chief executive. He added that he is also looking into buying as many as 400 U.S. stores, which he would seek to operate under the Toys R Us name.
“There is no toy business without Toys R Us,” Larian said, noting that he sold his first product to the chain in 1979. “It’s a big deal and I’m going to try to salvage as much of it as possible.”
According to its September bankruptcy filing, Toys R Us owes MGA Entertainment $21.3 million.
Despite turnaround efforts at Toys R Us, which included adding more hands-on “play labs,” retail experts say the 60-year-old company has been unable to get customers back into its stores. It doesn’t offer the low prices or convenience of some of its larger competitors, nor the fun-filled experience that many smaller outfits do, some analysts have said.
Toys R Us, based in Wayne, N.J., has been struggling for years to pay down billions of dollars in debt as competitors like Amazon, Walmart and Target win over an increasingly larger piece of the toy market. Its bankruptcy filing last year cited $7.9 billion in debt against $6.6 billion in assets. The company said it has more than 100,000 creditors, the largest of which are Bank of New York (owed $208 million), Mattel ($136 million) and Hasbro ($59 million).(Jeffrey P. Bezos, the founder and chief executive of Amazon, owns The Washington Post.)
For many of us, Toys R Us was a mainstay. It was a treat to go there and just be surrounded with TOYS, especially in the era of pushing nostalgia of the late Gen X and Millenials. I remember playing the first 30 seconds of Metroid there (barely enough to get the morph ball), of wandering around in awe looking at all the bikes, and generally just having the time of my life.
Lately, however, Toys R Us has fallen on hard times. Undoubtedly hit by the emergence of online stores, TRU's problems mostly revolved around debt. They would buy large swaths of product, and then not sell them. Anecdotally, I found this was because TRU usually had higher prices than their competitors (there is a well known "tax" on TRU exclusives), and further they just didn't rotate stock much. So every time you went in, you saw the same things.
That said, TRU has been a stomping ground of mine for nearly 15 years. As a toy collector, I would stop in regularly (at least once a week for the last few years) and see if anything interesting was released. I loved seeing the happiness of kids running around. And sadly.. I'm likely never going to see that again, unless MGA succeeds.
In the Lego thread, we were talking about how this has a lot to do with Bain Capital, who floated a loan to the company and then wouldn't help them pay down that loan. I don't see that referenced in the WaPo article, so I'll just call that unverified for now.
But needless to say, this is going to hurt the country.. perhaps in more ways than one.
THIS THREAD IS ABOUT:The closure of Toys R Us US, UK, and the buyout of TRU Canada\
The business practices of TRU (including working conditions, treating customers, etc.)
How toy stores can survive nowadays
How toy business works (man, remember the controversies over Breaking Bad action figures in TRU?)
The future of TRU
How venture capital is destroying businesses
The practices venture capital companies use to suck companies dry
The sleazy sales practices of furniture retailers (Page 16+)
THIS THREAD MIGHT BE ABOUT
Changing demographics in kids - notably, TRU still had extremely rigid gender roles defined, though I suspect most of that is on the toy manufacturers. But.. very classical.
THIS THREAD IS NOT ABOUT
Politics
Not letting a kid be a kid.
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They were because of Wall Street. The company was purchased in a leveraged buyout by Bain Capital several years ago, placing an unsustainable amount of debt on the company's books.
By the way, this makes the second toy store chain Bain has killed, as they did the same thing to TRU's longtime rival KB Toys.
Not sure.
I think that WaPo left the strongest burn for their last line.. and one I'd personally disagree with.
Emphasis mine. Trust me, Walgreens' toy section is anemic and even MORE overpriced.
Whenever we go to the mall, which is rare, we stop by and do a walk through Toys R Us.
We never buy anything though, which is obviously part of the problem they're having, but just being able to walk through a store like that surrounded by toys and colour has a more childlike quality to it than browsing a website.
It’s not a very important country most of the time
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They’re given phones and tablets to keep them distracted younger and younger and go right for iOS games instead.
Ease of access to the internet and social media has made children grow up faster.
So there’s less demand for toys nowadays in general.
I'm not so sure about this. Yeah, maybe there is a decline in traditional toys, but Lego is still doing amazing, and I loved seeing coding and STEM toys in TRU. I think that if TRU would've come out with an affordable line of the littlebits or something, that you'd see that stuff take off like nobody's business.
I assume they made out like bandits in the process.
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That's their whole MO.
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Of course. It's a legal version of a "bust out".
Here's a good video about what happened to TRU:
https://youtu.be/4JYUo9WKkao
It makes me sad about Toys r Us, but the last time I was in one was over a decade ago.
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Later on, my first big purchase was getting Space K’Nex from a Toys R Us. Things provided literally weeks of entertainment at a time through high school. I’m sad to see them go, and I hope that the buyers find a way to preserve that last little morsel of childhood experience (maybe revamp it a bit)
I still remember how amazing it was to go to Toys R Us as a kid and spend my pocket money on micro machines.
It’s hard when the competition doesn’t need to devote shelf space to displaying merch, or pay for clerks to be there even when there’s no business, or pay rent on store fronts. Also hard to stay competitive when the competition’s not just undercutting your prices, but delivering things directly to the customer’s door. Lot of retail places needed to adapt or die in the last several years and a lot of them chose Death (not necessarily because the wanted to mind you)
Won’t lay all the blame at TRU’s feet, but they not entirely victims either.
EDIT: From an article:
"And to really get what happened with Toys R Us, you need to understand how these private equity purchases work. They rely on something called a leveraged buyout.
“Leverage just means you're using lots of debt,” said Eileen Appelbaum, co-director of the Center for Economic and Policy Research.
If a private equity firm wants to buy a company, it’ll put up a small portion of the money. Then it’ll go to the bank and borrow the rest.
The key? “They put the debt on the company they buy,” Appelbaum said.
In other words, the firms take out these loans, buy a company and then make that company pay the loans back."
No, I'm pretty sure the problem was the multi-billion dollar boat anchor Bain put around TRU's neck.
When I wanted to buy something, I'd go to a Target.
I am responsible for this tragedy. I am a monster. I may as well have shivved Geoffrey myself, right in his big fuzzy heart.
Fuck that fucking asshole.
So...the owners (shareholders) were made an offer they couldn’t refuse and agreed to the buyout of their ownership?
I mean, it does feel like a bust-out, except the lenders in this case seem less like they’re being deceived by a fraudster and more like enormous dumbasses signing up to this knowing what KKR/Bain do...
They tend to be highly ranked as far as creditors go, so they get the first picking at the carcass. They're not the shop in the analogy, but part of the mob.
I wish I knew my local employees better. I want to help them, somehow.
One of the ladies there that we all call mom has been there since they opened the store in like 85 or something and her reaction is just, "Good. I opened this store, I get to close it down too." Badass.
The capitol firm steals the residual profits of the company as long as they possibly can
The lenders get their payments on the loan for as long as possible, and eventually get to sell the company for scrap (selling company owned locations etc)
Its exactly the same as taking out an 'interest only mortgage' and then only paying the principal forever. And in fact, you pay a little bit less than the principal and owe a little bit more each year. The banks won't stop you because they are getting paid, and you have an asset for them to sell at the end. And due to the way US bankruptcy works, the banks will get first bite at the apple before pensions and workers and suppliers. What this does is make businesses worth less on paper than they are in physical assets. So the bank can definately make its money back even on the failed company.
To prevent this happening in future, you need to change US bankruptcy law so that..
1) Each debtor is paid according to the fraction of the money they are owed by the company considering all the money the company is owed.
So if John is owed a million, Jenny 400k and Linda 100K and the company raises one million through sales of assets then each investor gets a fractional share of that (since noone can be paid back completely)
Alternatively, make debt non-transferable to companies you control? If the debt had to stay on Bain's books it would prevent this kind of shit I'd think.
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That would also hurt, possibly kill Hollywood, who moves money around their different projects like that all the time (each production is it's own company, and debt from bad investments is moved to the books of good ones). Not saying it's a bad idea, though...
Just want to point out that I hit agree because I am guilty of the same thing.
Although I’ll probably head over there soon to pick over the corpselook for some deals.
Hmm, a going out of business sale would be a good time to pick up some of the larger LEGO sets.
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There's a couple Power Rangers Legacy items I have my eyes on. Well, more like one. With Bandai no longer making Power Rangers toys (the license went to Hasbro) and now this, maybe that $200 toy will be.. reasonable.
TRU going under is as inevitable as automobiles making horse carriages outdated. Times change, markets change, technology changes, and either companies keep up or they fail.
Though what I do wonder about is what kind of impact this sort of thing has on animated shows, seeing as guillotine for so many otherwise-great shows has been "they don't sell enough toys". If this trend continues and toys are no longer a major market, are we going to see fewer animated shows? Are the ones getting made no longer going to be shackled to toy line success?
It was caused by a PE firm effectively killing TRU on purpose and looting as much money from it as possible on the way down.
Honestly I wouldn't be surprised to see the opposite happen. Toys R Us is never replaced, and its role is subsumed by an existing entity like Amazon, which was already muscling it out.