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Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle
- dforrestwilson 9y agoTake the same building, reduce the space dedicated to toy sales, open up a series of indoor playgrounds and gymnasiums. Heck maybe carve out a daycare facility. Maybe some sort of toy lab for kids to try before they buy. Refocus the concept on being a real place for kids to grow and I think you'd see customers coming in the door again.
- JamesCoyne 9y agoRetailers like Toys R Us usually lease their stores.
- devmunchies 9y agoA place to try before you buy on amazon.
- dmix 9y agoAs an analogy, I visited a weird Ikea experiment like this in Toronto at a popup in an old retail store building. But half the store was some (not very fun) carnival games and some products on display. The products were available to purchase but the variety was (severely) limited and somehow felt like an afterthought. A portion of the retail center was a place to buy the food that is popular at the suburban retail outlets, but a little out-of-place in a downtown area with plenty of alternatives. I feel like this was a failed approach to this idea. That said, the try-before-you-buy combined for a primarily eCommerce company with a playground for kids approach makes a lot of sense to me. But I'm doubtful it transfers well to other submarkets. Unless they are living (but welcoming) examples of say a fashion lookbook or home furniture example displays by interior designers, similar to what Ikea has in half their maze-like suburban stores.
- CodeTheInternet 9y agoI used to go to Borders constantly, like a hangout. As Amazon grew, I found myself doing exactly this: going to check out the latest releases, flip through the pages, pull out my phone and check Amazon prices. 99% of the time it was cheaper there. Add the book to a wishlist or my cart, put the book back on the shelf and leave empty-handed. I felt horrible when Borders went under, but I do the same at B&N. If brick-n-mortar want to compete with Amazon, they need to compete with their prices. However, they also have a lot of additional overhead that makes it untenable. This trend of resellers is going to occur until Amazon dominates the market, or we start buying direct from vendors which doesn't seem likely for many items.
- tolien 9y agoWhere it's impossible to compete on price, bookshops (and other segments of retail) need to compete on features, for example a number of retailers have seen a huge growth of people collecting online orders in retail stores [1]. I've picked up an Apple store order within a few minutes of ordering it online (obviously it depends on stock). Considering how much Prime Now costs, there's evidently money to be had for offering rapid gratification. Unfortunately a number try to have it both ways with high prices, uninterested staff (not helped by low wages) and terrible service. Little wonder Amazon's eating their lunch. 1: http://internetretailing.net/2017/01/evidence-points-click-collect-christmas/ http://internetretailing.net/2017/01/evidence-points-click-c... - "John Lewis has said that 52% of online orders were picked up via click and collect this Christmas, with use of the delivery method up by 14.5% compared to last year"
- 8ytecoder 9y agoThis is not true any more btw. Amazon has lost a number of advantages after they started increasing the number of warehouses and placing them close to consumers. The only advantage they retain is that because their distribution is a warehouse instead of store, they can stock and restock any time they want - and not have to pay the additional labor cost of restocking during after-store hours, and also to keep the place functional but not necessarily presentable. Don't forget that shipping costs are not neglible and Amazon also provides free returns ...etc. Stores can try a new model where they charge a little extra for customers who want it right away and then aggressively price match online for those who don't mind receiving the item in a day or two. That way, they can keep their labour cost low, and operate like a showroom. However, they need to really aggressively market their touch and feel factor at the same cost as online.
- icelancer 9y agoCharge rent/visiting fees.
- JimboOmega 9y agoIt sounds like from reading relevant articles it's not so much business model as staggering debt loads from being taken private that is hurting the company. They have no money to do anything with right now.
- ChuckMcM 9y agoThis was the impression I got as well, and 10 years later, balloon payments to come due, and you've got a real squeeze on your hands.
- reviewmon 9y agohttp://badlandsplayspace.com http://badlandsplayspace.com
- dforrestwilson 9y agoInteresting thanks
- nielsbot 9y agoBain Capital strikes again?
- marsrover 9y agoI remember being young and looking forward to every year near Christmas my mom and Grandma would take me to Toys 'R' Us and pick out my present. Feels weird to hear they're going bankrupt. Understandable, though. Huge stores with random assortments of product (non-essential product, unlike toilet paper et al.) aren't cost effective or convenient in comparison to something like Amazon.
- deleted 9y ago[deleted]
- smaili 9y agoIt really is unfortunate that stores I grew up with as a kid, ones like KB Toys, Montgomery Wards, Service Merchandise, Blockbuster, Kmart/Sears, and now even Toys"R"Us have gone by the wayside for one reason or another. It both depresses me and blows my mind that future generations may not even be able to experience Brick and Mortar.
- heurist 9y agoDo we really want our kids to enjoy fluorescent-lit warehouses full of cheap crap that will be thrown away a couple months after it's bought?
- Shivetya 9y agoI figure we do more damage by limiting their exposure to other people and places filled with sites that they cannot truly experience just by ordering stuff over the internet. we are raising future generations in an environment where it becomes deadly easy to isolate one self from the world. that environment also gives you the ability to teach your children. from making choices, to behaving in public, to seeing other children do both, to being out of the house in a noisy environment that is strange, exciting, maybe even a little scary, all the while with a parent to help them understand. plus where does it end, how much do we write off due to our prejudices?
- criddell 9y agoYou didn't enjoy that when you were a kid? I sure did. Of course if they didn't let me play with the stuff and instead made me keep it in the box on the shelf, I'd be wealthier today.
- bodz 9y agoThere's something to be said for getting rid of excessive waste and unnecessarily large warehouses of "cheap junk", but it's also worth remembering that toys play a very important part in teaching children fundamental skills like hand-eye coordination, simple problem solving, fostering imagination, etc. It's a game of "what-ifs", but I'm fairly confident in saying I wouldn't be pursuing the career I am now if I had never had the experiences of walking down the Lego aisle at the toy store and falling in love with piecing together toy cities.
- speg 9y agoAw man, I've just rediscovered this place with our 9 month old son. Was looking forward to going there as he grew up. Hopefully they can work out some sort of restructuring..
- magic_beans 9y agoMost kids are just as happy playing with the wrapping paper as with the toy inside. That is to say: your son will be just as happy with something you two might find or make together.
- criddell 9y agoStar Wars action figure? No way. Lets get some paper towel tubes, markers, and glitter and make our own!
- jamiek88 9y agoI know right? Such a mom thing to say. My 10 year old self rolled his eyes so hard.
- yellowapple 9y agoI don't know about the figurines themselves, but I did plenty of this for buildings and vehicles.
- ksenzee 9y agoThe original post was about a 9-month-old. No baby that age cares in the slightest about Star Wars, but they love boxes.
- criddell 9y agoWell, he also was talking about the future.
- speg 9y agoOh he loves the boxes his toys come in. I was more looking forward to checking out the new LEGO myself ;)
- javajosh 9y agoOf all the things in the world, children's toys are THE most amenable to replacement by makers, tinkerers, and other people who want to do something in the real world. (Alas, that's not what's happened. People just buy the cheap plastic crap from Amazon.)
- EnFinlay 9y agoDoesn't Toys 'R' Us sell the same "cheap plastic crap" as Amazon?
- bspn 9y agoAmazon sells a slightly different but much wider range of "cheap plastic crap" thanks to FBA. There's no shortage of budding sellers with an Alibaba account who think they have the next best thing (read: re-labeled, generic Chinese crap) and flood the market with crazy cheap products making it difficult for bricks and mortar retailers to compete. A store like Toys 'R' Us may have a slight advantage when it comes to licensed merchandise, but I think even most of the big sellers long ago accepted that it's impossible to ignore the Amazon juggernaut and now also sell on the platform.
- javajosh 9y agoI'm not an expert, but based on casual observation, yes they do.
- summer_steven 9y agoCheap plastic toys probably use superior plastic to the PLA plastic of most maker bots though
- falsedan 9y agoPretty sure most makers and tinkerers don't have the liability insurance or budget for safety testing or the mental shielding to handle when their products cause the death of a 18-month-old. Step one of designing a toy: work out how many children who get it could be killed by it. Step two: make that number as close to zero as you can. Step three: arrange for enough money to cover the gap.
- kizer 9y agoDamn. I was just in one like two weeks ago looking for a laser tag system. The prominent NERF gun display right by the entrance was glorious. NERF has progressed significantly and has also developed a new kind of spherical ammo in case you were wondering. I'll have to buy a few while they're on clearance.
- kemiller 9y agoCan someone explain why it would be loaded up with debt on going private?
- empath75 9y agoThey borrowed money to buy their shares back.
- foota 9y agoThey could have taken out financing to buy back their shares.
- function_seven 9y agoWhoever took it private needed money to buy out the shareholders. They borrow that money using the business itself as collateral. They buy the stock and the company is now private, with all that debt on the books.
- Spooky23 9y agoTo make the private equity people rich. They stiff the suppliers, employees and other creditors. This is a variant of the 80s era stuff in the movie Wall St. When WalMart was expanding regional players like Ames, Jamesway, etc would do this. You could tell when it was happening because the stores would be stuffed to the brim with stuff before the bankruptcy.
- mbesto 9y agoFairly typical large cap PE strategy. Load the company up with debt then sell it off and let the company figure it out after. Note - not all PE firms do this (big or small) but it is a common strategy that does earn them money.
- mywittyname 9y agoHow is this not fraud?
- mbesto 9y ago
- Crontab 9y agoI have come to the conclusion that it is very hard for a specialty businesses to survive in the era of Walmart and Amazon - which does not bode well long term for places like Barnes & Noble and Gamestop. I hope I am wrong.
- zabuni 9y agoAt least for Gamestop, you're probably not wrong. Amazon Prime gets you new video games at 20% off MSRP. That's cheaper than what the distributor sells them for.
- hn_user2 9y agoI think GameStop makes most of its money buying trade-ins. Perhaps they are more in the pawn shop business than the video game business?
- midnightclubbed 9y agoGo into your local Gamestop for a copy of Destiny 2 and see how hard they try to push you into buying a pre-owned (used) copy for $55 over the new copy for $60. Their trade-in value for Destiny 2 is $24 (in store credit) and their pre-owned purchase price is $55. No wonder the sales staff force the pre-owned games over new. Gamestop gave the middle finger to game producers when they realized how selling used games was way more profitable than new. When they file for chapter 11 in the near future they will claim downloadable games and competition from Amazon killed their business rather than their greed causing their suppliers to find alternative sales channels.
- swang 9y agoi'm on a slow connection so i can't find the links/news but i don't think that's true anymore. they certainly have restricted it. before it was including collectors editions. then it was only on preorders. not sure about it now but it's definitely not all just 20% discounted anymore.
- mywittyname 9y ago
- otoburb 9y agoDoes this mean that the "R Us" trademark suits will cease[1]? [1] https://www.lexisnexis.com/legalnewsroom/intellectual-property/b/copyright-trademark-law-blog/archive/2011/05/12/like-a-scene-from-the-godfather-toys-r-us-tells-smokes-r-us-don-t-mess-with-the-family-of-marks-free-download.aspx https://www.lexisnexis.com/legalnewsroom/intellectual-proper...
- Keyframe 9y agoOr intensify?
- downrightmike 9y agoAh yes, another Bane Capital success story.
- product50 9y agoThough this may have something to do with Amazon (and retail generally trending online), it does appear that the big culprit here were Bain Capital (and its partners) who took it private in 2005 via leverage buyout and ladened Toys r Us balance sheet with untenable debt from thereon. Apparently, they were paying $500M in interests alone per year vs. reinvesting capital in growth of their offline stores or online retail. I personally feel that, similar to bookstores which as seen a resurgence in neighborhood mom & pop stores, while Amazon will continue to dominate, a lot of smaller toy retailers (both online and offline) will spring up to take Toys r Us' space.
- pm90 9y agoI just don't understand the people/institutions that give loans to such entities when a simple analysis would show how burdened by debt they are... are these investors really that stupid to loan money at unsustainable rates?
- rb808 9y ago2005 was a different age, both in the shopping world and finance.
- ComputerGuru 9y agoLBOs still happen, unfortunately.
- quickthrower2 9y agoStupid? The investors are loaning someone else's money. They probably isolate it legally so if the loan defaults they are not personally liable and it doesn't affect any other investments. The money isn't hard earned. It isn't someone's hard sweat-earned savings invested. It is debt. Debt generally just expands the money supply.
- atourgates 9y agoToy stores are a _great_ example of opportunity for brick and mortar. Just like book stores, they operate in a space where curation, discovery and the physical experience adds real value. The town I grew up in has a great independent toy store, and I make it a point to shop there every time we're in town. Every time I find something unique that I would have never looked for on Amazon, and often I'm hooked by the tactile act of playing with something that couldn't be fully replicated online. As an interesting aside, this particular store[1] fought for its right to keep their mural (which was awesome but violated city codes) all the way to the supreme court[2]. They lost, but you've got to admire the chutzpa of someone willing to do that. [1] http://www.inlandoctopus.com/ http://www.inlandoctopus.com/ [2] http://www.seattletimes.com/seattle-news/city-paints-over-walla-walla-octopus-sign/ http://www.seattletimes.com/seattle-news/city-paints-over-wa...
- ars 9y agoI guess I'm never getting my eToys gift certificate redeemed then :(
- Spooky23 9y agoToo bad. Toys r Us has a great selection and good pricing. I found that they almost always beat Amazon on toys and eliminated the risk of counterfeit stuff, especially for things like Lego.
- krob 9y agoI don't want to grow up, I want to be a Toys `R` Us kid......
- marcell 9y agoToys 'R' Us might have been a great store when we (I) were kids, but I went there a few months back--what a wasteland. Barbie, GI Joe, and movie tie-in action figures as far as the I can see. Good riddance. People can buy crappy Angry Birds dolls on Amazon just as well as Toys 'R' Us. I hope this opens up opportunities for superior brick & mortar toy stores.
- deleted 9y ago[deleted]
- nielsbot 9y agoWonder if Amazon will eventually get there? I think they are opening brick and mortar stores now... They can dominate both online and in meatspace.
- tssva 9y agoWhen was it anything but Barbie, GI Joe and movie tie-in action figures? That is mostly what it was in the 70s and 80s when I was a kid. 1/2 the movie action figures are probably Star Wars just like when I was a kid.
- slantedview 9y agoLeveraged buyouts take down another victim. As always, it's shocking that these are legal.
- dadrian 9y agoThe CEO of Toys 'R' Us as of 2015 is Dave Brandon. He was the former CEO of Dominoes Pizza. After he left Dominoes in 2009 is when they started the "We used to suck, we don't anymore, please come try us again!" advertising campaign. After Dominoes, Dave Brandon was the athletic director at the University of Michigan. During his time as AD, he managed to alienate the majority of the fan base, hire a coach who got worse over the course of four years and who ended with a losing record and who gave up the title of "winningest program" to Notre Dame, violate FOIA law, repeatedly mishandle PR situations (including the time where it appeared that a QB with a concussion got put back in the game), and run up the athletic department debt. He got fired on Halloween 2014, after slightly over four years as AD. Color me not surprised Toy 'R' Us went under.
- bllguo 9y agoAre there non-cynical explanations of how someone with such a terrible track record gets hired? Maybe a dearth of alternative CEOs? Or is the reality as bad as it appears?
- needsilence 9y agoI mean, it's happened ten billion times before, but if that's not enough evidence for you...
- narrator 9y agoWho's on the board that hired him? Did they have a pre-existing personal relationship from a frat or something? Getting to the bottom of this would probably inform a good stock shorting strategy.
- coredog64 9y agoI'm now pondering a "these fratboys are deleterious to boards" index fund thanks to your post.
- ThrustVectoring 9y ago
- vonkale 9y agoFrom SEC (shortened): +-----------------+--------+--------+--------+ | In millions | 2017 | 2016 | 2015 | +-----------------+--------+--------+--------+ | Net Sales | 11,540 | 11,802 | 12,361 | | COGS | -7,432 | -7,576 | -7,931 | | Operating Earn. | -460 | -378 | -191 | | Interests | -455 | -426 | -447 | | Total loss | -6 | -156 | -452 | +-----------------+--------+--------+--------+ 1. Their revenue is quite stable but decreasing 2. Their EBIT is positive and increasing 3. Their operating cashflow is negative but increasing 4. So they seem to be running out of cash... 5. They cannot lend more with such bad terms eg. 12% interests.
- tempestn 9y ago> With speculation of a bankruptcy mounting, shares of Toys “R” Us’s vendors tumbled on Monday. Mattel Inc., the maker of Barbie and Fisher-Price, fell 6.2 percent -- its worst decline in seven weeks. Shares of Hasbro, the company behind Monopoly, Nerf and Transformers, dropped 1.7 percent. Does Toys R Us owe money to Mattel? Or are people thinking that if they go away or significantly reorganize people will just buy fewer toys of these types? On the surface a 6% drop for Mattel seems huge based on this news. If a grocery chain goes into bankruptcy, you're not going to see Coca Cola stock drop..
- danhak 9y agoAccording to this article, Toys "R" Us accounts for about 10% of Mattel's revenue. That seems pretty significant: https://www.reuters.com/article/us-orbital-atk-northrop-grumman/northrop-grumman-nears-deal-to-purchase-orbital-atk-source-idUSKCN1BS0YB https://www.reuters.com/article/us-orbital-atk-northrop-grum...
- tempestn 9y agoIf Toys R Us is responsible for about 10% of all toy sales by revenue that wouldn't be terribly meaningful, but yeah, if they sell proportionally more Mattel toys, whereas other retailers might sell comparable toys from other brands more, that could certainly account for it. Thanks.
- IMTDb 9y ago"Ratings agencies have rushed to cut their credit ratings on Toys “R” Us to reflect the sinking market sentiment...[S&P] had the retailer rated B- just two weeks ago, and Moody’s Investors Service still has a B3 rating and stable outlook for the name." Ratings agencies once again showing how efficient they are at actually rating debt. B3 and stable outlook for a company that has actually field for bankruptcy, you gotta be kidding me.
- aklemm 9y agoA toy store that isn't even a little magical to walk into is not long for this world.
- yeukhon 9y agoWhen they closed down its flagship at Time Square, I was expecting TRU not doing very well.
- euske 9y agoThis episode of Planet Money (best podcast evah btw) kinda explains why retails like Toys`R'Us was defeated by Amazon. http://www.npr.org/sections/money/2017/07/26/539552579/episode-629-buy-low-sell-prime http://www.npr.org/sections/money/2017/07/26/539552579/episo...
- andreygrehov 9y agoI'm not surprised. They sell pure garbage. Every single time I go there to get a toy for my kid, I can't pick anything. I end up spending an hour walking around choosing the best of the worst and keep repeating to to myself something like: "Where does this shitty store get the money to pay the rent?"
- taf2 9y agoWhile I agree... as a kid I have very fond memories... makes me kind of sad. I see the same excitement now in my kids...
- andreygrehov 9y agoI moved to U.S. just a few years ago, but I know what you mean. The bar to kids' happiness is very low, which is, unfortunately, not the same with adults, including myself.
- pbhjpbhj 9y agoThe kids are thinking "did that look cool" and are swayed by the box and presentation (eg big box to hide the small size of the toy, etc.). Adults are wise to the tricks and look for a toy that's not just good to play with "right now" but also will last to be played with again, and will still entertain when the box is open and the novelty has faded. In short kids are an easy mark (easy to con).
- runesoerensen 9y agoThey've just filed for bankruptcy https://www.toysrusinc.com/press/toysrus-inc-commences-court-supervised-processes-to-implement-financial-restructuring https://www.toysrusinc.com/press/toysrus-inc-commences-court...
- m23khan 9y agoWhat are toys these days? VTech LED craziness or Lego-on-steroids? No kid (even Babies it seem) are interested in old fashion wooden/metal toys whereas toddlers+ are only interested in digital/musical/mechanical stuff that feels all 'plasticy' and 'gimmicky'. Let's face it - kids these days are taught to follow the latest 'fads' when it comes to toys and to feel everything they own is super disposable -- similar to their parents. No wonder Toys R Us can't meet the budgetary requirements of a modern parent whose kids are so fussy when it comes to toys that as soon as the kid is 7/8 years old, the focus is shifted to electronic gadgets and the modern sport 'app'rchery.