Toys R Us to close all 800 of its U.S. stores
washingtonpost.com
washingtonpost.com
> A year later the company was taken private by KKR, Bain Capital and real estate firm Vornado. The $6.6 billion purchase left it with $5.3 billion in debt secured by its assets and it never really recovered.
http://money.cnn.com/2018/03/15/news/companies/toys-r-us-clo...
Maybe the physicial toys business is totally screwed, but this isn't evidence of that. It's evidence of a company being loaded down with debt and drowning under it.
In both cases the underlying business might be failing, but this kind of debt-encumbering buyout purchase usually results in a transfer of money from both what's left in the business and also the (bank) creditors to the capital firms.
Going private allows a company to focus less on shareholder value (its legal first obligation as a traded company save for a legally defendable company charter that counters this in any way, which is rarer than it should be). That theoretically allows it to focus on growth or market entrenchment before profits, and take risks otherwise you wouldn't be able to take without risks of lawsuits.
It allows more freedom in restructuring and financial business decisions. The downside to that is when a vulture capitals like Bain or Ichan comes along, their motives are to extract as much profit from the 'asset' as possible for themselves regardless of the outcome to the business.
It stands in start contrast to venture capital firms that actually care about success. its usually obvious which one 'investors' are. If they're willing to put up money and take risks with you at the start, they're venture. If they're coming along after you're successful but struggling with a 'grand plan' to restructure and improve your business if you accept their money (and hand over way more control than you should), they're vulture.
All of that is just my observations of course. I'm open to counter arguments.
This is widely claimed but there is no such requirement:
https://corpgov.law.harvard.edu/2012/06/26/the-shareholder-v...
The reason is obvious: it’s hard to predict over any non-trivial time in the future, so there’s a broad deference to business judgement. In the case of Toys-R-Us, for example, if they’d been a public company at the time that argument could simply be that lower returns to shareholders now was critical to the long-term health of the business. People who disagreed could sell their shares or attempt to find enough like minded shareholders to replace the leadership but nobody could say their view is unambiguously correct and so the law stays out of it.
If the assets of a company are worth more than the business as a going concern, shouldn’t the assets be liquidated or repurposed for more effective purposes?
I’m asking basically why anyone would loan money to Toys R Us after it was acquired by corporate raiders.
> Its debt was downgraded to junk bond status in January of 2005, at a time when Amazon's sales were just 4% of their current level.
And then it says:
> A year later the company was taken private by KKR, Bain Capital and real estate firm Vornado.
The fact that their bonds were downgraded to junk a year before tells me that Toys R Us was already in trouble by the time private equity stepped in.
Sears also seems to be headed down the same path, and I have the same question there.
https://foragerfunds.com/bristlemouth/dick-smith-is-the-grea...
Sometimes you will see that private equity only comes in when the company is in trouble anyway but I don't think Toys 'R Us was in the bad of shape when Bain and KKR showed up.
Every play toy should last multiple children as a rule. We don't take that to the extreme as parents, but the basic rule is sound. Even children like it that their cousins play with the same toys they've played with when younger. Buy good stuff. Share. Bye bye Toys R Us.
I mean, economically understandable, but I hope we get our focus back on 'good toys' soon. Actual engagement over stimulus overload. Toys are so important for kids, and I think parents are already realizing again.
In the 80s, weekdays were full of 30 minute toy commercials masquerading as cartoons - Superfriends, GI Joe, Transformers, etc.
The 80s Transformers movie killed off all of their characters and introduced new ones to sell more toys.
Constantly introducing new characters (and letting others fall into the background) worked for them, but actively killing them off backfired badly.
Transformers saw meteoric growth, from the first introduction of the comics and TV series in 1984 to the star-studded cast of the movie in 1986, then viewing figures plummeted. They misjudged how invested a large part of the audience were in their favourite characters: mainly Prime but also others. In fact they brought Prime back only one year later, though the damage was done: kids were moving on to the next fads. The decline would likely have happened anyway due to the audience moving on to other things, but the movie for all its success is credited with accelerating that significantly.
The fact is that average toy buyer does not care much about quality and people who actually do are too few for the industry to change the trend.
Also, I suspect, a large part of the reason is that having X dollars to spend most consumers will prefer to buy more flashy toy.
I don't think wood is a very suitable material to make children's toys with, but to each his own.
An example: The metal miniature cars of the 80s still survive to this day. The plastic miniature cars, even those with metal tops, of the 10s get ruined by my boys in 24-48 hours. I don't even think they play like little monsters. A few good falls and it's gone. Then I get to toss it away and I really cringe. I blame toy stores for that, but that's totally naive.
Honestly, I don't have a problem with cheap, plastic toys.
This is something my wife & I don't see eye-to-eye on. She favors things made from wood, tend to be more expensive, etc. I personally don't care. At this age, kids are hard on toys. Their change and they might play with a toy for 5 minutes & the never again. All the more reason for something cheap & inexpensive.
Why not?
Wooden toys are more expensive and often less complex -- perhaps that is what you are referring to?
I grew up with Brio railway[1]. I still remember the vast networks my brother and I built. 40 years later these same toys are used by our own children. These wooden toys have stood the test of time much better than any plastic ones we had at the time. In every regard.
I have no interest in wooden toys, (most) board games, kites, or nice dolls... I want the toys that have the cool movie or TV show tie-ins, I want the toys that exist in these expansive worlds I'm familiar with, I want the toys that all my friends have (and, to a certain extent, expect me to have)...
Projecting things like "children like it that their cousins play with the same toys they've played with when younger" seems extremely questionable (and, if I had to guess, hugely false - what kid wants old toys from a cousin).
This is not about a shift in the toy market, it's about Toys "R" Us.
When I was a kid I loved toy stores for discovering new stuff like https://en.wikipedia.org/wiki/Micronauts (ugh! it was in the 70s/80s!). Nowadays you cannot discover by going to some store and everything is overclassified (toy stores or comic toys). BTW Japan used to have better quality toys.
How can this country be creating a world where children grow up without toy stores? When I was a kid Toys 'R' Us was a wonderland that excited my imagination around every corner.
Money isn't everything. Money doesn't even really matter at all. A world without toy stores matters.
i'm a toys 'r' us kid
Toys R Us relies upon parents driving to an out of town shopping centre. There are also independents that do a better job of presentation than Toys R Us. They're more expensive but so are Toys R Us compared to Amazon.
It is not an attractive place for the kids to visit.
Toys in our youth were well-marketed phenomens that everyone had to have and a store could consistently profit off of by having them in stock. How do you stock Minecraft mods ? There are also still lots of physical toys, probably too many of them considering how often they are made to be disposable and prolific.
It's different then walking into a Walmart or Target and seeing a toy section, because it's surrounded by other things and there's not nearly as many toys to look at.
It kind of sounds like you're agreeing with the GP. Kids love mountains of cheap plastic crap so for them it can be exciting even if parents detest it...
Toys 'r' Us was always a walmart of toy stores. But when you're 3 feet high and playing with TMNT figures everything in the store is _awesome_.
Last time I was there, there were zero toys at Toys-R-Us I'd want to buy for my kid. That's not a commentary on socioeconomic status either; I'm pretty poor. But I can get high-quality educational toys elsewhere cheap.
Looking over these comments I see a lot of adults talking about buying toys for their children as adults and you are all missing the entire point.
The toys aren't for you. Toys do not exist for you to mold your children into whatever predestined vision you have for them. The toys the kids want are cheap and plastic and they excite their imagination. They look cheap and plastic to you because you're 30 years older and playing with $2,000 computers or $30,000 cars (yes, your cars are toys).
Toys are about giving a child property they can do whatever they want with. It's about treating them like they have a mind of their own and letting them explore things that you probably never even thought of. If your "toy buying decisions" are riddled with adult concepts like responsibility and educational value you are missing the point.
I'm not saying educational toys are bad, I'm saying kids know what educational toys are and what they want is action figures and video games and toy weapons. A store that is packed floor to ceiling with exactly those things is a _wonderland_ to a child.
Today, my kids get to a toy store weekly - Walmart and Target have pretty decent sized toy departments that they repeatedly get lost in for a while. There isn't a need to go somewhere to find out what is new, kids just research it online.
Target's website prices are usually close to Amazons and they will price match themselves.
Toys R Us had slightly higher prices than pretty much everywhere, even a Lego store was usually cheaper.
What I hope this spawns are more mom-n-pop toy stores that will carry the specialty items.
"The downfall of Toys “R” Us can be traced back to a $7.5 billion leveraged buyout in 2005, when Bain Capital, KKR & Co. and Vornado Realty Trust loaded the company with debt. For years, the retailer was able to refinance its debt and delay a reckoning. But the emergence of online competitors, like Amazon.com Inc., weighed on results. The company’s massive interest payments also sucked up resources that could have gone toward technology and improving operations."
https://www.bloomberg.com/news/articles/2018-03-08/toys-r-us...
https://www.theguardian.com/business/2018/mar/14/toys-r-us-t...
> A group of toymakers led by Isaac Larian...submitted a bid to buy Toys R Us’s Canadian arm, which includes 82 stores, according to Larian. 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.
Note the use of an elaborate corporate structure which involves a company paying its parent company 16.5% (!) on debt.
Good business, bad organization.
They reached out to my former company (a retail marketing firm) for some work a little over a year ago, and Googling the name shows it’s probably not going so well.
No brand is better than bad brand.
Toy purchasers know exactly what they want. The often know exactly how much it costs elsewhere. The only reason they would go into a toy shop is if they need it right now. Online retail has been eating into that for years but it's coming to a head now next-day is common and same-day exists for many people.
Losing Babies R Us, however, is going to be inconvenient.
Experts (?) with their "sense of excitement" and such, but the parents shopping for this year's Xmas sensation consumer good will be looking at price and availability (with "Getting the hell out of there" likely somewhere in the mix), hence Walmart then, and Amazon now.
I also believe that not only did they succumb to online retailers but their price point was easily undercut by the dollar style stores in some markets and besides pricing the retail locations were not always ideal
They failed to adapt to consumers of 2018.
IMO it is very much like Guitar Center for music. There is no way Guitar Center is around in 10 years and there is nothing that can be done on their part. The whole concept that the business is based on is outdated.
I would think buying an instrument demands at least some hands-on experience to confirm your choice, but not many parents are concerned with giving their kids a test drive of new toys before purchase (and indeed can't, due to packaging).