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Toys R Us Cancels Bankruptcy Auction, Plans To Revive Brand (theglobeandmail.com)
Toys "R" Us may not be dead after all. According to Reuters, "The top lenders of Toys "R" Us have decided to cancel the bankruptcy auction of its brand name and other intellectual property assets and instead plan to revive the Toys "R" Us and Babies "R" Us brand names." From the report: The bankrupt retailer's debtors aim to open a new Toys "R" Us and Babies "R" Us branding company that maintains existing global license agreements and can invest and develop new retail shops. The lenders also plan to expand its international presence and further develop its private brands business. The bids were not superior to the plan to revive the brand as it did not offer "probable economic recovery" to creditors as well as benefits to stakeholders who would maintain the brands under the new independent U.S. business, the court filing showed. Under the intellectual property auction, the company had planned to sell its assets, including the brand names of Toys "R" Us, Babies "R" Us, registry lists, website domains, Geoffrey the Giraffe and other assets. The company filed for bankruptcy protection in September last year, but later said it would sell or close all 800 of its U.S. stores.
That article acts as though the problems started ten to fifteen years later than they really did.
For a long time, Toys R Us was the #1 toy retailer in the US. It was the first big box toy store, and the only one in many cities. They "kept doing what has been successful" (rested on their laurels) as other competitors emerged. In the early 1990s Target and especially Walmart starting taking a big chunk of that market. The aging Toys R Us stores didn't attract customers, who could get the same toys at Walmart while doing their weekly shopping.
By 1998, Walmart sold more toys than Toys R Us. The internet was also eating a growing chunk of the market.
In 2000, the company hired CEO John Eyler to reinvigorate the company. Eyler decided the way forward was to remodel all the stores and open new, bigger stores. They spent and borrowed a lot of money to do that. They had already been having financial difficulties in the 1990s, then Eyler added more debt, which mean lahe debt payments. The company started losing money faster.
By 2005, the strategies were very obviously not working. Yet they did have a very recognizable brand. Some private investors thought they could salvage the company by more effective management. That's where the LA Times article picks up the story. Unfortunately for the private investors, 2005 was a very bad time to invest in struggling brick and mortar retailer with no signifocant online presence. That's the year Amazon introduced Amazon Prime, with free two-day shipping. The next year, Amazon launched Fulfillment by Amazon, which had thousands of retailers selling through Amazon.com. Amazon beat Toys R Us handily.
There's the political narrative, and then there's history.
Here's an article about the failure of Toys R Us from 2004
https://www.nytimes.com/2004/0...
Eyler's strategy to fix their "running out of money" problem was - spend a ton more money. He had come from FAO Swhartz, which went bankrupt twice. He would have been a good choice if you wanted someone to show you how to go bankrupt.
> Amazon, Wal-Mart, and Target were all competitors, and yet they still managed
Amazon, Walmart, and Target operate toy specialty stores? You know the actual competitors are in that space? KB Toys, FAO Swhartz, all the toy store chains are gone, because that model doesn't work.
Yes, when you get a loan to buy a house, the house is collateral - the bank will take the house if you don't make the payments. When you get a loan to buy a car, the car is collateral - the bank will take the car if you don't make the payments. When you get a loan to buy a struggling specialty retailer ...