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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

#121

Post by tootie »

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…

I just sat through a meeting with a bunch of high-level execs at a huge corporation. The amount of shrugging and barely educated guessing that goes into million dollar decisions is pretty absurd. The main qualification seems to be the willingness to make decisions in the face of uncertainty.

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

#122

Post by swang »

zabuni wrote: post #32
Crontab wrote: post #17

I have come to the conclusion that it is very hard for a specialty businesses to survive in the era of Walmart and Amazon - which does not bode well long term for places like Barnes & Noble and Gamestop. I hope I am wrong.

At least for Gamestop, you're probably not wrong. Amazon Prime gets you new video games at 20% off MSRP. That's cheaper than what the distributor sells them for.

i'm on a slow connection so i can't find the links/news but i don't think that's true anymore. they certainly have restricted it. before it was including collectors editions. then it was only on preorders. not sure about it now but it's definitely not all just 20% discounted anymore.

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

#123

Post by coredog64 »

narrator wrote: post #115
bllguo wrote: post #109

Earlier quoted context omitted.

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?

Who's on the board that hired him? Did they have a pre-existing personal relationship from a frat or something? Getting to the bottom of this would probably inform a good stock shorting strategy.

I'm now pondering a "these fratboys are deleterious to boards" index fund thanks to your post.

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

#124

Post by legitster »

bllguo wrote: post #109
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?

There is something to be said about transitional CEOs who keep the lights on while the company figures out a long term strategy. Most actually terribly run companies don't just bounce back the minute they get rid of a bad CEO.

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

#125

Post by tempestn »

> With speculation of a bankruptcy mounting, shares of Toys “R” Us’s vendors tumbled on Monday. Mattel Inc., the maker of Barbie and Fisher-Price, fell 6.2 percent -- its worst decline in seven weeks. Shares of Hasbro, the company behind Monopoly, Nerf and Transformers, dropped 1.7 percent.

Does Toys R Us owe money to Mattel? Or are people thinking that if they go away or significantly reorganize people will just buy fewer toys of these types? On the surface a 6% drop for Mattel seems huge based on this news. If a grocery chain goes into bankruptcy, you're not going to see Coca Cola stock drop..

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

#126

Post by mediaman »

slapshot wrote: post #98
guelo wrote: post #89

Earlier quoted context omitted.

Which is a great way for vulture capitalists to steal money from a company. I've seen it before: 1. Take out a giant loan and use it to buy a company by offering slightly more than it's worth. 2. Transfer the loan to the company's books. 3. You now own a company and it didn't cost you anything! You get to be the CEO or sit on the board. And take nice fat bonuses. 4. The company now has to pay off the loan it used to…

Because it doesn't work that way? The banks that fund the "giant loan" in #1 put in covenants preventing any payments to the equity investor (who has to put in their own money) from paying out on the equity until all the debt has been paid off. This is not their first rodeo. The nature of the covenants varies a lot between industries, but the general rule is that the banks won't lend into the deal unless they are gua…

The covenants still typically allow the private equity investor to do a 'recap' (i.e., issues themselves a dividend) while still having the debt outstanding. This would come with restrictions, such as balance sheet ratios and interest coverage ratios.

What the PE player would want to do is do the leveraged buyout, cut expenses to boost EBITDA, reduce working capital demand (create cash) by lengthening payables, collecting extended debts, and cutting inventory or selling off excess assets, and then once interest coverage is up from the EBITDA boost, issue a recap as big as the covenants allow to get much of the original equity risk off the table.

Then they see if they can grow it, or sell it off, to get their multiple.

Sometimes it works, sometimes the company goes through bankruptcy (ch 11) instead. It's not whether it always works, it's whether it works on average. The results have higher variance due to the higher leverage but it doesn't make it wrong.

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

#127

Post by coredog64 »

gist wrote: post #106
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 hap…

With three kids, my wife and I used to buy Lego at every opportunity. It was also an easy gift idea to give to grandparents.

My kids haven't played with Lego for years. They enjoy doing it Minecraft or one of a zillion other Steam games that offers the same build-it-yourself functionality as Lego.

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

#128

Post by Pxtl »

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…

Sounds like the definition of Kevin Smith's "fail upwards"

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

#129

Post by javajosh »

EnFinlay wrote: post #31
javajosh wrote: post #13

Of all the things in the world, children's toys are THE most amenable to replacement by makers, tinkerers, and other people who want to do something in the real world. (Alas, that's not what's happened. People just buy the cheap plastic crap from Amazon.)

Doesn't Toys 'R' Us sell the same "cheap plastic crap" as Amazon?

I'm not an expert, but based on casual observation, yes they do.

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

#130

Post by danhak »

tempestn wrote: post #125

> With speculation of a bankruptcy mounting, shares of Toys “R” Us’s vendors tumbled on Monday. Mattel Inc., the maker of Barbie and Fisher-Price, fell 6.2 percent -- its worst decline in seven weeks. Shares of Hasbro, the company behind Monopoly, Nerf and Transformers, dropped 1.7 percent. Does Toys R Us owe money to Mattel? Or are people thinking that if they go away or significantly reorganize people will just buy…

According to this article, Toys "R" Us accounts for about 10% of Mattel's revenue. That seems pretty significant:

https://www.reuters.com/article/us-orbital-atk-northrop-grum...

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