Thursday, March 15, 2018

[UPDATE] Toys "R" Us to Become Toys Were Us, Plans to Close All Remaining U.S. Stores

Toys "R" Us will soon end its U.S. operations after what it called a "horrific holiday season."  The Wayne, NJ-based retailer, which was founded in 1948 and once had over 1,500 stores, announced early Thursday that it plans to liquidate its remaining roughly 735 U.S. stores after failing to come to terms to continue as a going concern in bankruptcy court.  The closure of Toys "R" Us will leave its 31,000+ US employees out of work.   


When we reported in September that Toys "R" Us had filed for chapter 11 bankruptcy, the retailer had hoped to trim its store count and emerge from bankruptcy.

This past January Toys "R" Us announced that it would close about 180 stores (eight in Georgia) with plans to restructure and emerge from bankruptcy protection; unfortunately that will not be happening.  

Toys“R”Us also announced Thursday that it is pursuing reorganization and a sale of its Canadian and international operations in Asia and Central Europe.  The Company’s international operations in Australia, France, Poland, Portugal and Spain are considering their options in light of this announcement, including potential sales in their respective markets.  In connection with the sale process, the motion the Company filed with the bankruptcy court included bidding procedures for the Canadian operations. The Company also disclosed that it is engaged in discussions with interested parties for a transaction that could combine up to 200 of its top performing U.S. stores with its Canadian operations.

Many are already mourning the loss of the beloved toy retailer.  Like other now defunct toy store chains -- FAO Schwarz, Lionel Playworld, KB Toys, Zany Brainy, Learningsmith --Toys "R" Us's closure is an unfortunate casualty of changes in the shopping habits of customers young and old.  

While other specialty chains were hit hard by the expansion of big box retailers like Target and Walmart, both of whom stocked plenty of toys, Toys "R" Us was competing not only against other chain retailers but also the rise in popularity of Amazon.com, as well as computer and phone-based games.  The kids of tomorrow won't know what they missed.  

As we reported in September, Amazon and Toys "R" Us were actually once allies.  

On August 10, 2000, Jeff Bezos, Amazon's founder and CEO, told CNNfn [a now defunct financial news division of CNN] that the then newly signed union between the companies is "a long-term contractual alliance" that could be a model for future alliances.       

In 2004, Toys "R" Us sued Amazon alleging breach of contract.  In their suit, Toys "R" Us alleged that Amazon was not honoring the 10 year exclusive contract with Toysrus.com.  "Under the deal, any time a consumer searches for a toy, game or baby product on Amazon.com, the search will be automatically redirected to the product on Toysrus.com's Web site."  Toys "R" Us alleged that Amazon was permitting third parties to sell products that should only have been sold by Toys "R" Us.  Amazon said at the time that the lawsuit would "fail," but later countersued, citing a “chronic failure” by Toys "R" Us to keep items in stock.  Amazon and Toys "R" Us dissolved their partnership in 2006.  In 2009, Amazon agreed to pay Toys "R" Us $51 million to settle the dispute. 

It's worth noting that Amazon also previously had similar partnerships with both Circuit City and Borders Books & Music.  Circuit City and Borders both later ended their partnerships, but also ended operations entirely, ceasing to exist in 2009 and 2011, respectively.  (Under new ownership, Circuit City announced plans to reopen stores in 2016, later delayed to February 15, 2018, and then delayed again due to overwhelming website traffic.)

Few U.S. young adults who grew up in the 80s and 90s didn't know Geoffrey the Toys 'R' Us giraffe mascot or the catchy  "I'm a Toys 'R' Us kid" advertising jingle.  


In a bankruptcy court filing Thursday, Toys "R" Us said it had a horrific holiday season "well below worst case projections." It earned just $81 million in pre-tax profit in the fourth quarter, $250 million below the company's target and a quarter of what it earned the prior year.   "The stark reality" is that the company will run out of cash in the United States in May, the company noted in its filing. Given its bleak outlook and limited options, it determined the best way to pay back its creditors is to liquidate the remaining inventory in its remaining U.S. stores. 

Toys "R" Us did not say when it would close the stores, but they will probably stay open for at least another 60 days or so.   

The company was taken over by a consortium of private equity firms KKR and Bain Capital and real estate investment company Vornado in 2005.  Together, they paid $6.6 billion, but saddled Toys 'R" Us with $5.3 billion in debt.

In Georgia, the retailer has active liquidation sales at eight stores:  Albany (Toys "R" Us), Smyrna (Toys "R" Us & Babies "R" Us),  Alpharetta (Babies "R" Us), Dunwoody (Babies "R" Us), Douglasville (Babies "R" Us), Lithonia (Babies "R" Us), Newnan (Babies "R" Us) and Fayetteville,(Toys "R" Us & Babies "R" Us)    

Atlanta area stores not included in the previous round of closures but now destined to close include stores in Alpharetta, Buford, Dawsonville, Douglasville, Duluth, Kennesaw, Lithonia and McDonough, among others.  

In 2015, Toys "R" Us closed metro locations in Tucker and Buckhead.  The former Tucker store in Northlake Tower Festival shopping center remains vacant while the Buckhead store in Buckhead Station was replaced by a Saks OFF FIFTH and a relocated Cost Plus World Market

What is your fondest Toys "R" Us memory?  Where do you buy toys today?  Do you think that the 200 "top performing" Toys "R" Us stores will remain open?

Please share your thoughts below.  

11 comments:

Anonymous said...

They got "Bained". Good ol' private equity debt.

J Leeds said...

If it weren’t for the crushing debt that the PE firms saddled them with, Toys R Us would have been profitable. They were paying over $400 million a year in debt service. That prevented them from even planning to invest in store upgrades and updates.

Anonymous said...

SAD. Had some great times with the kids at the Cumberland store. They would get so excited picking out toys and that would make me smile. Hard to do that with a online order.

Anonymous said...

March 14, 2018, at approximately 4:59 p.m., Geoffery the Giraffe was led out back of the Toys-R-Us flagship location with the promise of meeting some children. While the giraffe eagerly scanned the horizon, Beauregard Gufford, 56, a GOP voter and holder of now worthless Toys-R-Us stock who was chosen by lottery for this task from thousands or republican applicants, stepped behind Geoffery and with one shot from his Assault Rifle - 15, put the beloved childrens mascot out of it's misery.
"He went clean, only kicked once," Gufford remarked. "I'll probably have the head mounted, it'll look great next to the water buffalo I got a couple years back."

Thanks tRump! We miss you and love you Obama!

Anonymous said...

Another entire industry killed because of people's inexplicable insistence on abandoning real stores for an inferior, inconvenient, and overpriced website whose solitary goal is to destroy every single other company in existence and eliminate any stream of money that doesn't lead directly into the pockets of Jeff Bezos. And yes, that is literally the ultimate aim of Amazon. Countless analysts who've studied the company in depth and written the same thing, or from Jeff Bezos himself, who unironically told his henchmen to prey upon vendors and companies "as a cheetah would pursue a sickly gazelle" and even created a subdivision called the "gazelle project".

Anonymous said...

@March 16, 2018 at 8:31 AM

Your so stupid hillary! Obama's economy killed this brand as well as this generation of on line shoppers - Amazon!

Lock her up!

Anonymous said...

@ 5:46 Cmon now - Hillary didn't post that! She broke her wrist after falling in the bathroom inebriated on Russian vodka. @ 8:31 is probably her girlfriend Huma.

Anonymous said...

My kids are past the Toy R Us stage, but I went into the Cumberland store to buy some things to donate to Toys for Tots. Nearly nothing was on sale - everything was full price. If you don't have any sales at Christmas time (and you are a toy store) if is no wonder your sales were "below worst expectations." People aren't going to overpay for the same items they can buy anywhere else for less.

Anonymous said...

@ March 18, 2018 at 11:31 AM

Well Huma need to stop! Hehe

Anonymous said...

Oh whatever! Amazon, Wal-mart, Target and other online retailers are the reason Toys R Us is closing. Not the president. Speak for yourself...we all do not love Obama!

Anonymous said...

RIP Mr Lazarus