Bad news for fans of the toy centered retailer; Bloomberg is reporting that Toys R Us is planning to liquidate its assets located in the United States. This is detrimental to major toy companies like Mattel, Lego and others; but more so for the companies producing niche products aimed at a more mature audience.
“Toys “R” Us’s $583 million of first-lien bonds due in 2021 dropped as much as 4 cents on the dollar to 83.9, according to bond-pricing system known as Trace. That’s the biggest decline since September, the month the company filed for bankruptcy.
The downfall of Toys “R” Us can be traced back to a $7.5 billion leveraged buyout in 2005, when Bain Capital, KKR & Co. and Vornado Realty Trust loaded the company with debt. For years, the retailer was able to refinance its debt and delay a reckoning. But the emergence of online competitors, like Amazon.com Inc., weighed on results. The company’s massive interest payments also sucked up resources that could have gone toward technology and improving operations.”
What does this mean for you, the viewers of this site? It means companies whose only presence in the United States exists via online and at brick and mortar Toys R Us stores will suffer. If you buy products from Bluefin, Banpresto and others then it may be important to understand that the closing of Toys R Us will hurt their bottom line.
Is it possible to see these companies build relationships with other retailers like Walmart, Target and others? Sure. But what you may not realize is that the existence of Toys R Us is what kept prices low at Walmart. Walmart is and has been known to sell products, like toys, at a loss in order to undercut and compete aggressively with companies like Toys R Us. When that competition falls out of the market, then they can raise their prices again as the customer will be left with few other options to physically shop for the products in question.
For those who enjoyed their time with the chain, it may be best to make a few more trips while you still can. Do you have any fond memories of Toys R Us? Lets hear about them in the comments.
For more information and a great piece of writing on the topic, check out this article from Toy Ark.