How vulture capitalists ate Toys 'R' Us • Hacker News Board

Re: How vulture capitalists ate Toys 'R' Us

#61

Post by kevin_thibedeau » Mon, Apr 23, 2018, 6:14 PM UTC

JumpCrisscross wrote: post #56

Spooky23 wrote: post #39

Earlier quoted context omitted.

This particular company was strategic as it served as a competitive counterbalance to discounters and online stores. The impact of the death of ToysRUs will be significant to the toy industry as a whole, as Walmart/Target only devote a couple of hundred linear feet to toys, and Amazon has killed the little shops that powered the long tail.

A counterbalancing opinion: "The departure of Toys 'R' Us from the retail landscape will give a boost to neighborhood toy shops. That’s according to the American Specialty Toy Retailing Association, which predicted that 2018 will be the best year yet for neighborhood toy stores nationwide as consumers flock to these stores in the wake of the closure of Toys 'R' Us." https://www.chainstoreage.com/finance-0/group-predi…

Small comfort if you're selling large toys that small shops don't have the floor space to stock.

Re: How vulture capitalists ate Toys 'R' Us

#62

Post by Spooky23 » Mon, Apr 23, 2018, 6:14 PM UTC

JumpCrisscross wrote: post #56

Spooky23 wrote: post #39

Earlier quoted context omitted.

This particular company was strategic as it served as a competitive counterbalance to discounters and online stores. The impact of the death of ToysRUs will be significant to the toy industry as a whole, as Walmart/Target only devote a couple of hundred linear feet to toys, and Amazon has killed the little shops that powered the long tail.

A counterbalancing opinion: "The departure of Toys 'R' Us from the retail landscape will give a boost to neighborhood toy shops. That’s according to the American Specialty Toy Retailing Association, which predicted that 2018 will be the best year yet for neighborhood toy stores nationwide as consumers flock to these stores in the wake of the closure of Toys 'R' Us." https://www.chainstoreage.com/finance-0/group-predi…

No doubt true, but the number of those stores has declined over time. My guess is you’ll see vertically integrated stores from LEGO and other brands pop up.

Re: How vulture capitalists ate Toys 'R' Us

#63

Post by [deleted] » Mon, Apr 23, 2018, 6:15 PM UTC

toss1 wrote: post #58

listenallyall wrote: post #43

TOY shares had fallen from $40 to the low teens by 2004. By announcing a sale of the toy business, the stock rebounded and ultimately the sale to private equity closed at $26.75 per share. That Board knew they had a declining asset on their hands and sold out, at a large premium, rather than watching their equity slowly decline over the next decade. Anyone who despises private equity should be celebrating this story,…

Agree they "Vultures" were the suckers in this case. Although I was initially inclined to agree with the tone of the article, just the numbers in the article itself disproved it's main thesis. Near the end: > "Bain, KKR, and Vornado will have to write off their investment, of course. But they did suck around $200 million in fees out of Toys 'R' Us over the course of their ownership." Near the beginning: >"The trio pu…

[deleted]

Re: How vulture capitalists ate Toys 'R' Us

#64

Post by arx1422 » Mon, Apr 23, 2018, 6:17 PM UTC

If the debt load was excessive on an otherwise OK business then the debt would be restructured vs. putting the company into liquidation. The idea that absent the debt Toys R Us would have figured out how to invest in innovation is totally speculative. This is a badly reasoned article.

Re: How vulture capitalists ate Toys 'R' Us

#65

Post by chongli » Mon, Apr 23, 2018, 6:23 PM UTC

harryh wrote: post #38

chongli wrote: post #35

Earlier quoted context omitted.

OK, what are you looking for? Rich people get one shot at doing something, and if they fail, the government comes riding in and takes all their stuff? I can't speak for the person you replied to, but how about this? Less downside for the workers. We're talking about thousands of people losing their jobs. These people then go into a smaller labour market where they compete with other vulnerable retail workers, affecti…

Poorly performing companies going out of business in order for new, better companies to flourish is a necessary step for the creation of a healthy job market.

I don't see it. Working at Toys R Us may not have been great, fine, but it sure beats pissing in bottles in a sweltering/freezing Amazon warehouse.

Amazon is a lot more profitable than Toys R Us ever was but that doesn't mean they make the job market, let alone society, healthier.

Re: How vulture capitalists ate Toys 'R' Us

#66

Post by antris » Mon, Apr 23, 2018, 6:24 PM UTC

jcater wrote: post #22

oceanghost wrote: post #9

Competing against amazon with an animated Giraffe and a 3x markup was never going to work. If anything I'm surprised they made it this long. That is not to say that Bain, TPG, etc aren't objectively evil.

You're overstating the markup, and they've price matched (including Amazon) for a while.

"The guarantees typically require shoppers to provide proof of a lower advertised price on an identical item in stock at a nearby competitor’s store before a price match will be approved. However, many big-box retailers work directly with manufacturers and sell products with unique model numbers. As a result, the retailer can deny a price-match request, as no other store carries an "identical" item. Other common reasons for denial: the competitor is not "local," the ad lists a percent discount rather than a specific price, or the customer doesn't offer acceptable proof of the competitor's price.[9] Even if all criteria are met, retailers grant price-matching requests on a case-by-case basis at the discretion of store employees."

https://en.wikipedia.org/wiki/Price-based_selling#Price-matc...

Re: How vulture capitalists ate Toys 'R' Us

#67

Post by rayiner » Mon, Apr 23, 2018, 6:24 PM UTC

listenallyall wrote: post #43

TOY shares had fallen from $40 to the low teens by 2004. By announcing a sale of the toy business, the stock rebounded and ultimately the sale to private equity closed at $26.75 per share. That Board knew they had a declining asset on their hands and sold out, at a large premium, rather than watching their equity slowly decline over the next decade. Anyone who despises private equity should be celebrating this story,…

Yeah, seriously, the author is nuts. I've got a 5-year old and I can't remember the last time I've been to Toys R Us. She knows how to pick stuff out on Amazon; for trinkets there's Target, and a lot of her "toys" now are on her iPad/digital. Suburban big-box retail stores aren't a growth area, and toy stores selling Chinese-made junk are probably among the worst situated. Unlike, e.g. clothes or food, there is little value in being able to look at the thing before you buy (the kid probably wants it because its branded so it doesn't matter whether the actual toy is crap or not).

Re: How vulture capitalists ate Toys 'R' Us

#68

Post by Animats » Mon, Apr 23, 2018, 6:26 PM UTC

That article links to a much more important article: "What caused the retail apocalypse?"[1] In the US, malls are dying, because the middle class that supported them is dying off. Toys-R-Us operated in malls and sold non-necessity goods. That business is dead.

The direction US brick-and-mortar retail is headed is dollar stores at one end and luxury goods at the other, with little in between. Dollar General opens about 900 stores a year.

[1] http://theweek.com/articles/697378/what-caused-retail-apocal...

Re: How vulture capitalists ate Toys 'R' Us

#69

Post by bluGill » Mon, Apr 23, 2018, 6:32 PM UTC

arx1422 wrote: post #64

If the debt load was excessive on an otherwise OK business then the debt would be restructured vs. putting the company into liquidation. The idea that absent the debt Toys R Us would have figured out how to invest in innovation is totally speculative. This is a badly reasoned article.

That is partially up to the lenders though. The lenders have their input in bankruptcy court, and if they tell the court they want their money the court tends to listen. Lenders will generally agree to bankruptcy because it is better to be paid off in the future than take what they can get now. If the lenders don't think the company can actually find a way to pay off the debt that might want what they can get now so they can put it to better use.

My understanding is the debt was so high the lenders figure anything that happens is just throwing good money after bad.

Re: How vulture capitalists ate Toys 'R' Us

#70

Post by bluGill » Mon, Apr 23, 2018, 6:33 PM UTC

aklemm wrote: post #55

Thought limited, my experience in Toys 'R' Us was that it was no more fun and exciting then the toy aisles at Target. So how was a dedicated toy store going to win that way? Compare that to shopping for home improvement; way more fun at Lowe's than the junky/limited aisles at Target.

They had a much larger selection that target. If you are looking for something specific target is less likely to have it. If you are looking for a toy - any toy - target will have something good enough.