Toys “R” Us Kids Rooting for a Comeback
Toys “R” Us is an American toy retailer owned by Tru Kids, Inc. At its pinnacle, Toys “R” Us had a total of 800 stores operating in the U.S. and another 800 operating out of the U.S. It was considered a quintessential retailer to the toy business. After over 65 years of providing the community with toys, however, the company filed for Chapter 11 bankruptcy on September 18, 2017. It was several billions of dollars in debt, and Toys “R” Us became a story of private equity deals gone wrong. In March 2018, the announcement was made that they would close all their American and British stores. Chains in other parts of the world were sold to third-parties. However, in 2022, Toys “R” Us stores will be making a return to hundreds of Macy’s locations across the US as brand management company WHP Global acquired an interest in Tru Kids.
The company was first founded as Lazarus’s children’s furniture store in April 1948 by Charles Lazarus. He opened this furniture store to take advantage of the post-war baby boom of World War II. As Lazarus slowly included toys to his offerings, the focus of his store shifted from furniture to toys. It officially became founded as Toys “R” Us in June 1957. Lazarus personally designed the logo to feature a backwards “R”, as if a child designed the logo.
Toys “R” Us helped turn a $500 million toy industry to a $12 billion one from 1978 to 1990. At its pinnacle, the company sold 18,000 different toys at 1,450 locations around the world. It became a category killer and controlled 25% of the toy market.
Toys “R” Us filed for Chapter 11 bankruptcy on September 18, 2017, with the hopes that the move would enable some flexibility with their $5 billion debt. Chapter 11 of the United States Bankruptcy Code enables businesses to reorganize under the U.S. bankruptcy laws. By filing for bankruptcy, the company was able to acquire $2 billion to pay its suppliers and invest in operations. However, little had changed in the company’s predicament. Toys “R” Us has not had an annual profit since 2013. With each year prior to bankruptcy, the company had been paying hundreds of millions of dollars per year to hopefully mitigate their debt. This prevented any investments to improve operations, making them fall farther behind Amazon and Walmart in competition.
As part of its restructuring, Toys “R” Us announced that they would liquidate all of their U.S. stores while maintaining their more profitable Canadian locations in 2018. Liquidation started on March 23, 2018, and the online store shut down on March 29 of the same year. On April 24, the Canadian division was sold to Fairfax International, who was also interested in the U.S. division, for $234 million. However, on July 29, all U.S. stores were permanently closed after 70 years of operations. There was a $4 billion hole in toy sales during the holiday season of that year, which retailers such as Party City had taken advantage of by creating temporary stores named Toy City. However, on January 20, 2019, Tru Kids emerged from bankruptcy and partnered with Target on October 8 to relaunched ToysRUs.com, which redirects shoppers to Target when they check out. Towards the end of 2019, ToysRUs opened two new retail stores in the U.S., which would eventually close down in 2021 due to the pandemic. In 2020, when their deal with Target ended, the ToysRUs.com website started redirecting shoppers to Amazon products instead. On March 15, 2021, brand management company WHP Global, backed by a $350 million equity commitment, acquired an interest in Tru Kids and plans to open Toys “R” Us stores everywhere On August 19, 2021, a shift was announced as WHP Global partnered with Macy’s stores to open about 400 Toys “R” Us stores inside Macy’s stores.
Will the return of stores further drive or reignite the toy industry? Or will it lead to considerably more financial problems in the future? Regardless of the outcome, many are happy that Toys “R” Us is making a return.