Toys ‘R’ Us Didn’t Have to Die
bloomberg.com
Toys ‘R’ Us Didn’t Have to Die
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Re: Toys ‘R’ Us Didn’t Have to Die
#2Has it died? The sale of the Canada arm was finalized only a few days ago[1]. There is no indication that they plan to shut down any time soon.
[1] https://www.thestar.com/business/2018/06/01/fairfax-complete...
Re: Toys ‘R’ Us Didn’t Have to Die
#3Has it died? The sale of the Canada arm was finalized only a few days ago[1]. There is no indication that they plan to shut down any time soon. [1] https://www.thestar.com/business/2018/06/01/fairfax-complete...
The original US business is dead. The article is about that. It says that operations in Asia are also fine.
Re: Toys ‘R’ Us Didn’t Have to Die
#4Has it died? The sale of the Canada arm was finalized only a few days ago[1]. There is no indication that they plan to shut down any time soon. [1] https://www.thestar.com/business/2018/06/01/fairfax-complete...
The original US business is dead. The article is about that. It says that operations in Asia are also fine.
The ones here in Australia aren't independent and are currently in voluntary administration. For example they stopped accepting their customer loyalty cards, the one next to me seems to have stopped restocking as well. There are however some bidders to take over the entire Asian arm so it could be fine.
Re: Toys ‘R’ Us Didn’t Have to Die
#5I read the whole article, and I didn't really see a convincing argument that it didn't have to die. Sure, it could have eked out a few more years... but it was living on borrowed time.
Not only do most people shop online now, most toys are also online. I imagine most parents put money into TV shows, video games, iPhone apps, etc.
Re: Toys ‘R’ Us Didn’t Have to Die
#6Despite the title and the focus on the form of financing, none of the facts in the article even suggested to me that the company would be in any better shape if it had used equity financing rather than debt. It sounds, rather, like an unprofitable business that no one in their right mind would give any more money.
If someone thinks they can figure out how to make a workable business out of big box toy stores, it sounds like the name is for sale.
Re: Toys ‘R’ Us Didn’t Have to Die
#7I read the whole article, and I didn't really see a convincing argument that it didn't have to die. Sure, it could have eked out a few more years... but it was living on borrowed time. Not only do most people shop online now, most toys are also online. I imagine most parents put money into TV shows, video games, iPhone apps, etc.
I agree. Other than manage its debt more effectively, the authors don't really expound on what Toys R Us could have done differently to right the ship.
Was it moving more effectively into online sales? Or alternate business lines altogether?
Re: Toys ‘R’ Us Didn’t Have to Die
#8Retailing seems to be dying in US irrespective of the company:
https://www.bloomberg.com/news/articles/2018-04-17/retail-st...
Couple of years ago, one of my friends bought a store at a strip mall. The store was making a loss. And the previously owners were an elderly couple. So my friends thesis was that they weren't exactly tuned into the digital presence business and it was still entirely possible to run a store in US.
Two years later footfall in the mall has decreased a lot. And in spite of the digital strategy etc my friend's store hasn't worked well. Now he is not only in debt but he is also trying to sell the store. But there are no buyers.
Re: Toys ‘R’ Us Didn’t Have to Die
#9I read the whole article, and I didn't really see a convincing argument that it didn't have to die. Sure, it could have eked out a few more years... but it was living on borrowed time. Not only do most people shop online now, most toys are also online. I imagine most parents put money into TV shows, video games, iPhone apps, etc.
The company had been paying an unsustainable $400 million a year in interest.
Normal intuition would say that maybe the company could enter bankruptcy, wipe out that debt, turn the bond holders into the new owners, have the owners issue stock for a debt free company and sell the stock to pay off a fraction of the money they owed. That would seem like a rational approach that would maximize utility for at least owners and employees.
The problem apparently was that bargaining and brinksmanship destroyed the company before such a result could be considered.
Re: Toys ‘R’ Us Didn’t Have to Die
#10I read the whole article, and I didn't really see a convincing argument that it didn't have to die. Sure, it could have eked out a few more years... but it was living on borrowed time. Not only do most people shop online now, most toys are also online. I imagine most parents put money into TV shows, video games, iPhone apps, etc.
There's nothing about the brick & mortar toy space that's inherently living on borrowed time. It was Toys 'R' Us' own mismanagement that doomed it.
Toy stores can be a destination. Provide a compelling experience for parents and kids alike. It's easy to imagine a space where kids get to play with toys hands-on, and parents get to judge for themselves whether they think they're appropriate in terms of fun and quality—something you can't do online.
Make the adult experience a mixture of café and Apple store, and give the kids a safe "penned in" experience like IKEA does in their kids' section. Parents will enjoy the respite, and kids will beg to go. And of course, once they get there, they'll cajole their parents to spend more money. Never underestimate the power of a child in a store.
IKEA has nailed the brick & mortar experience, even though most of their products could easily be purchased online. Toys 'R' Us merely had to abandon their hubris and old thinking, and they could have killed it.
Instead, they languished with a chain of dirty, disorganized, depressing stores, ill-treated and unmotivated employees, and no vision.
They didn't have to die, but their leadership and strategy did.