The Globe and Mail:
Toys ‘R’ Us Inc, the iconic toy retailer, will shutter or sell its stores in the United States after failing to find a buyer or reach a deal to restructure billions in debt, putting at risk about 30,000 jobs.
The closure is a blow to hundreds of toy makers that sell their products at the chain’s U.S. stores, including Barbie maker Mattel Inc, board game company Hasbro Inc and other vendors like Lego.
“This is a profoundly sad day for us as well as the millions of kids and families who we have served for the past 70 years,” Chief Executive Officer Dave Brandon said.
Devastating news for the industry, the employees and all of us, young or old, who loved going to Toys ‘R’ Us.
Amazon on one side and Walmart on the other. Hard to compete against that. :-
That was part of the issue. Private Equity was a larger one though.
I don’t know such stuff, so feel free to educate me. But from the article…
“Toys ‘R’ Us’ creditors said in a court filing that Target Corp, Walmart Inc and Amazon pricing toys at low-margins and a greater-than-expected decline in toy and gift card sales following its bankruptcy filing in September led to the weak performance in the quarter.
“‘Even during recent store closeouts, Toys R Us failed to create any sense of excitement,” said Neil Saunders, managing director of retail research firm GlobalData Retail. “Its so-called heavy discounts remained well above the standard prices of many rivals.'”
To me that sounds like a nonsurvivable situation. I don’t understand why private equity gets a larger share of blame. Toys R Us had competitors that would have killed it no matter what. How do we distinguish in that situation between “something happening at the time, which wouldn’t have changed the course of events” vs “larger cause”?
From what little I’ve read, private equity firms rarely seem inclined to consider saving—or repurposing—a struggling business. It’s far easier to dismantle and sell it for parts. And they go after viable businesses, too.
“the blame is perhaps to be placed most squarely on its private equity ownership.” https://www.ft.com/content/02a5edbe-9d93-11e7-8cd4-932067fbf946
Their prices were full retail when you could get the same thing on Amazon, or practically anywhere else much cheaper. They didn’t even try to compete. I have to wonder if the fat cats at the top just ran it into the ground to collect their bonuses and move on. Sears is soon.
I was wondering about this. I get margin, etc but with that many stores I can’t imagine that they weren’t getting discounts close to or the same as Walmart and Amazon. Yes, there’s a cost to running physical stores with employees but did they have no room on pricing?
Also, frankly, I never saw any discussion of their ecommerce efforts and in their shoes I’d have wanted to do a real time inventory backend and an ‘order online/pickup in store’ system like Best Buy and Walmart do. Esp around the holidays that could be be sold as something along the lines of not worrying about whether the package will get to you in time, etc.
I remember when the Toys ‘R’ Us store in Colma (just south of San Francisco) opened. It must have been around 1969. The Banana Splits were appearing at the opening. I begged my mom to bring me and finally she gave in. We drove up and there was an unbelievably long line of people waiting to get in. My mom said “no way” and we went back home. I imagine I was in tears. But that store was a Mecca for me and my sister for many years.
I’m not a businessman, so I can’t tell what’s the right answer (and I’d wager a lot of businessmen can’t either 😉 ).
But this brings to mind when Microsoft crushed Netscape. As Netscape faltered, they were scrambling to save themselves. Afterward, there were no shortage of people to come out of the woodwork and say, “Look there. That wasn’t the right decision. Therefore Netscape failed because of bad decisions.” But it might be like the Titanic. After the thing starts sinking, there was no “right” decision. Just optimal-but-failing and suboptimal-but-failing. Amazon has killed off too many competitors for me to easily believe that Toys-R-Us had a viable path to salvation. No doubt the private equity doesn’t help the situation… but sometimes they’re actually right. Sell what you can before it’s not even worth THAT much. Shrug. I’ll miss the stores and that big logo. I still remember the old commercials and the jingle.
Because without debt servicing borne from the loads of debt piled on by their PE buyers, Toys ‘R Us was a profitable operation. And, with that money ties up in interest payments, management’s hands were tied from making investments in the future.
Translation: “Nobody really knows how these things work.”
I was fine paying full retail there if I could see something in person before making a buying decision.
Because it was a survivable if they didn’t have to also service billions in debt.
https://www.forbes.com/sites/adamhartung/2017/09/20/toys-r-us-is-a-lesson-in-how-bad-assumptions-feed-bad-financial-planning-creating-failure/#50f7589458ea
It’s likely I won’t miss them, because they’ll still be there. The Canadian business unit is profitable without the debt and is for sale. I wouldn’t be surprised if the brand gets kept, since it’s cheaper than replacing all the signs nation-wide.
The local Toys R Us moved into new (bigger and better) digs at the same mall in the last year or two. Pretty sure they’re doing fine.
Big Toys-R-Us stores was the reason minor toy stores had to close over the years here in Denmark. I never liked buying from it. Would rather go to a local store or get it on Amazon.
There was no doubt in my mind this would happen once Dave Brandon become the CEO. Have a look at his tenure as the athletic director at the University of Michigan. The guy is a walking, taking multimillion dollar disaster who wouldn’t know good stewardship of an organization if it kicked him in the nuts.