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Earlier this summer, the famous Toys R Us toy store closed nearly every 800 stores. The brand was heavily indebted and declared bankruptcy in September 2017. As part of the liquidation of its assets, it was considering auctioning its intellectual property, including the company's name, website and mascot, Geoffrey the Giraffe . Buyers believed that the beloved store was gone for good.
Now, however, it seems that Toys R Us might not die with our childhood dreams, after all: Court filings this week, which were first obtained by the Wall Street Journal, the company announced that she was going to give up the sale of Toys. R Us names and marks, and keep them instead. On Tuesday, the company issued a press release claiming that some of its current owners – without specifying which ones – wished to retain their intellectual property, as they were currently looking for ways to resurrect the brand "in a new reinvented way."
The potential resurrection of Toys R Us is another chapter in the long and unpleasant saga of the brand. After declaring bankruptcy in 2017, the company originally planned to reorganize in order to free itself of its debt and stay in business. After a mediocre holiday shopping season, its owners decided to unplug the device for good.
The brand also made headlines regarding the difference between the treatment of its 30,000 retail workers and its executives: while the company announced that it would not give severance pay to all employees. Employees who lost their jobs, their leaders received millions of dollars in bonuses.
But it's more important than this one company: The rise (and perhaps the future) of Toys R Us shows just how tumultuous the saga of a US business can be and how helpless workers can be. to be confronted with such a system.
Toys R Us went from the retail store to the distressed store
Toys R Us, which began as a simple crib and pushchair store in the United States, in 1948 became a chain of big box stores and a symbol of the American retail industry. During its 70 years of operation, the company has grown to 1,600 stores worldwide. He was known for his endless stock of toys, dolls, bicycles and electronics. Geoffrey the Giraffe was a nationally recognized symbol. The company introduced the latest toys to children over many years of expensive catalog marketing, television and radio. The company owned a huge and iconic 10,000 square foot flagship flagship store in Times Square, and even bought one of its major competitors, FAO Schwarz, in 2009.
At one point Toys R Us was considered "the most important toy store in the world". However, even with his brazen radio jingles and hundreds of stores, he could not keep pace with the competition from cheaper retailers like Walmart. Target, and more specifically Amazon. Toys R Us initially partnered with Amazon to sign a 10-year contract that would allow its website to be redirected to Amazon in exchange for selling toys exclusively for Toys R Us. But Amazon has finally allowed other toy dealers to sell on his site, and a bitter trial ended the partnership. Amazon currently sells $ 4.5 billion worth of toys a year.
While Toys R Us still hit $ 792 million a year in 2017, it was not fast enough to compete with a giant like Amazon, and its traditional stores also had huge costs. When the company finally decided to reorganize its website in 2016, world director of technology, Lance Wills, admitted that the company's difficult battle was to "make up for 10 years of innovation."
The bankruptcy of Toys R Us has become a symbol of corporate greed
Amazon was certainly not the only factor responsible for the sinking of Toys R Us. By the time the company filed for bankruptcy in 2017, it was drowning in $ 7.9 billion of debt. Many pointed out that the debt was the result of "pirate looting" and "Wall Street greed" on the part of investors.
In 2005, private equity firm Bain Capital and two partners, KKR and Vornado Realty Trust, bought Toys R Us for $ 6 billion. They spent $ 1.2 billion while the rest was borrowed.
It's however Toys R Us that has repaid the remaining $ 4.8 billion owed to its investors. The company had to repay $ 400 million of debt every year, a figure often higher than its annual profits. This deal prevented the toy company from keeping pace, in a situation where a retailer defense group called "an ATM for Wall Street".
When the news about Toys R Us' financial situation became public, the stark contrast between its lowest partners and company executives was the same. More than 30,000 retail workers lost their jobs and the company said they would not receive any severance pay or compensation for days off sick or vacation vacations. Bain Capital, KKR and Vornado, on the other hand, would have won $ 470 million on Toys R Us, in addition to leaders receiving multi-million dollar bonuses.
The bankruptcy of Toys R Us was felt all over the country. A photo of Geoffrey the Giraffe holding a suitcase inside an empty store became viral and shoppers mourned the favorite chain of childhood. Meanwhile, the store's associates held mock funerals in the lobby of Bain's head office for Toys R Us, which houses a giant Geoffrey tombstone. Rallies and demonstrations took place inside the car parks of the stores, in which politicians such as Sense participated. Cory Booker, Kirsten Gillibrand and Bernie Sanders. Workers also fought in Congress, lobbying Washington for increased scrutiny of private equity deals in retail.
A sign of progress for morality in American affairs?
Over the last few months, Toys R Us has closed almost all of its stores, closed its website and organized mega-sales to get rid of all its products and assets, including hardware and store equipment. It certainly seemed like everything was over. Now, however, since they have given up auctioning their brand, name and iconic mascot, Toys R Us owners say they want to "develop ideas" for the new Toys R Us stores and retail stores. his sister brand, Babies R Us, would look like.
To be clear, this rollback of the intellectual property bankruptcy auction does not mean that Toys R Us is completely bankrupt; instead, the owners retain their most valuable assets and try to find a future for the company.
We do not know if the brand will regain its former glory. It could very well resurrect as a brand of zombies, like American Apparel or Nasty Gal, both of which were saved from bankruptcy but are significantly different from the companies they once were. The owners of Toys R Us may also decide to license the use of the name of the company and the brand to another person, earning royalties instead of undertaking a gigantic task, such as resuscitation of a mark.
It is fair to assume, however, that all 30,000 workers who have been laid off will not be rehired. But if the troubling and moving story has a shiny side, it's all the attention attracted by Toys R Us that leads to some retribution. The Washington Post announced this week that Bain Capital and KKR have agreed to set aside $ 20 million for a fund to be distributed to Toys R Us workers to whom it owes money – a rare finding positive to a story too common.
Although Rise Up Retail, the advocacy group that worked with Toys R Us workers, believes that hedge funds owe its workers $ 75 million, not just $ 20 million, they also told the post that "this victory at Toys R Us is part of a larger movement of workers and family opponents to hold Wall Street responsible for their investments."
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