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Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

bloomberg.com

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Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#101

Post by xenadu02 »

kemiller wrote: post #16

Can someone explain why it would be loaded up with debt on going private?

Bain (and their horrible ilk) put up a tiny amount of capital to secure huge loans. They used those loans to buy the company, taking it private. Once it is private they can do whatever they like with it; they pay themselves back for the loans by loading the company up with debt (and then some to ensure an immediate profit). They cut everything to the bone, fire as many people as possible, then spin the husk back out as a public company (or offload it to some other sucker).

Bain effectively risked nothing to make a killing and ensure Toys-R-Us would eventually file for bankruptcy due to an unsustainable debt load. Banks are happy to loan Bain money for these schemes because Bain makes a killing on them and private equity almost always finds a sucker dumb enough to buy the zombie company off them. (Every once in a while the zombie goes south so fast private equity is left holding the bag).

For loans to the zombie company the terms are punishing enough the bank only needs the zombie to survive for a limited amount of time.

The part I don't understand yet is who is the dumb money buying shares in these hollowed-out debt-laden husks from the private capital vultures? It almost always ends up badly. Even when it doesn't the upside isn't great.

FWIW Guitar Center is almost certainly headed for the same end and for the same reason.

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#102

Post by juiyout »

rb808 wrote: post #66
atourgates wrote: post #58

Earlier quoted context omitted.

Toy 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 tact…

>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. You're absolutely right. The result usually is though that the kid finds a toy they like then puts in on their Birthday/Christmas wishlist from where the Santa buys from Amazon. I like to think I never do this, but if the price is…

Former electronics manufacturer sales here. Manufacturers usually set the pricing steps with volume generally at the lowest price they can accept. The venue of goods sold often does not play a role in manufacturers' price structure.

Now when it comes to channel cost, physical stores are already taking more margin out of retail price and for manufacturers, there is simply rarely large enough incentive to sell to physical toy stores at a lower price.

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#103

Post by xapata »

thanksforcoming wrote: post #91
rb808 wrote: post #66

Earlier quoted context omitted.

>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. You're absolutely right. The result usually is though that the kid finds a toy they like then puts in on their Birthday/Christmas wishlist from where the Santa buys from Amazon. I like to think I never do this, but if the price is…

>I think that manufacturers should sell to physical toy stores at a lower price, and actively make sure online price is the same or higher than instore. but I dont how easy this is to police or even if is legal in some countries. These days, many brick & mortar stores are a market inefficiency. It's simply cheaper to store & ship out of centralized warehouses (as it goes when you order online) than to ship merchandis…

What do you think of Amazon's retail outlets? They're little bookstores with a café and a display for a few electronics. They don't provide anything unique. In fact, they only sell what's popular on Amazon.

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#104

Post by dadrian »

The 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.

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#105

Post by Jach »

booleandilemma wrote: post #33
magic_beans wrote: post #19

Earlier quoted context omitted.

Those toy stores were worthless palaces of consumerist made-in-china crap. I'm happy to see them go.

Where did you buy your Star Wars action figures? Your Lego sets? Or did you not play with toys as a kid?

As a kid I never bought my toys... My parents sometimes bought them while we were shopping in the toy department of a store like Fred Meyer or Walmart, occasionally other random places like gas stations or movie rental stores, but the general department store is where we'd go when I needed a toy-gift for a friend/relative (unless it was something more specific like some packs of pokemon cards where then I'd go to the card store). Usually I'd only get toys wrapped up on holidays like Birthday/Christmas/Easter and it didn't matter where they came from.

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#106

Post by gist »

product50 wrote: post #39

Though 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 reta…

> who took it private in 2005 via leverage buyout and ladened Toys r Us balance sheet with untenable debt from thereon

You are not taking into account the changing habits of kids as a result of both the iphone and ipads or equivalent. Kids don't view toys the same way that they did prior to 2007 onward and neither do parents. I grew up in a day and age where getting a chance to have a toy was a big deal (and only happened a few times per year at that). Today kids can play games and be entertained with a digital device. It's hard to even compare to whatever projections that were done with the leveraged buyout.

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#107

Post by erulabs »

bduerst wrote: post #53
bodz wrote: post #25

Earlier quoted context omitted.

There'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 n…

Same - except for me it was also Capsela (now called IQ Key), a bunch of cheap plastic crap that let you engineer modular machines. I think the medium that kids play with 'toys' has changed with tablet and phone devices. Now they're solving puzzle apps and building Minecraft cities - whether or not that's a good or bad thing, I'm not sure, but it doesn't bode well for toy stores.

Capsela! THANK YOU! I've been googling "little plastic bubbles with gears in them" occasionally for years without finding these.

Between this, K'nex and the original Macintosh my life as a programmer was more a destiny and less a choice :P

Edit: Holy shit, when I google "little plastic bubbles with gears in them", Capsela comes up. Maybe google has gotten better at vague searches in the last decade :P

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#108

Post by pstuart »

mbesto wrote: post #55
mywittyname wrote: post #47

Earlier quoted context omitted.

How is this not fraud?

What's fraudulent about it?

The part where they skim millions in "management fees" to take it private, and then leave it floundering under so much debt that it dies?

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#109

Post by bllguo »

dadrian wrote: post #104

The 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 wors…

Are 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?

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#110

Post by SilasX »

atourgates wrote: post #58
product50 wrote: post #39

Though 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 reta…

Toy 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 tact…

>Toy 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.

Not anymore. Customers just use them as a free showroom and then buy it cheaper off Amazon.

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