Many have wondered why Toys R Us went out of business. Here, we explore some of the main reasons that may have contributed to the company’s downfall.
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The beginning of the end for Toys “R” Us
In 1948, Charles Lazarus founded Children’s Bargain Town, a baby-furniture retailer in Washington, D.C. The store was successful, and Lazarus expanded the business by opening several more locations. In 1957, he changed the name of the company to Toys “R” Us to reflect the focus of his stores.
In 1966, Lazarus took Toys “R” Us public and opened the first toy store designed specifically for children. The store had a carnival atmosphere with bright colors and an oversized statue of Geoffrey Giraffe, the company’s mascot. Toys “R” Us became known for its “War on Prices,” and its slogan “Kids R Us” conveyed the message that kids came first at the store.
The company experienced rapid growth in the 1970s and 1980s as it opened new stores across the United States and expanded internationally. By the early 1990s, Toys “R” Us controlled about 20 percent of the U.S. toy market. But as the company grew larger, it struggled to keep up with changing customer tastes and competition from discount retailers such as Walmart (WMT).
In 2005, private equity firms Kohlberg Kravis Roberts & Co. (KKR) and Bain Capital Partners purchased Toys “R” Us for $6.6 billion in a leveraged buyout. The deal left Toys “R” Us with about $5 billion in debt, which put tremendous pressure on the company to generate enough cash flow to service its debt payments.
To make matters worse, the Great Recession hit just a few years after the buyout, causing consumers to cut back on their spending on discretionary items such as toys. In addition, online retailers such as Amazon (AMZN) began eating into Toys “R” Us’s market share as they offered consumers greater selection and convenience.
In 2017, Toys “R” Us filed for Chapter 11 bankruptcy protection in an effort to reorganize its business and get out from under its crushing debt load. However, despite some initial success in streamlining its operations, the company was unable to find a buyer or secure enough financing to stay afloat. In 2018, it announced that it would be liquidating all of its U.S. stores
The company’s massive debt burden
One of the main reasons that Toys R Us went out of business is because of the company’s massive debt burden. In 2004, the company was acquired by a group of private equity firms for $6.6 billion. To finance the deal, Toys R Us took on a large amount of debt.
In recent years, as the company struggled to compete with online retailers such as Amazon, its debt burden became increasingly unsustainable. In September 2017, Toys R Us filed for bankruptcy protection. However, despite efforts to restructure its debt and find a buyer, the company was unable to find a way to stay afloat and announced that it would be liquidating all of its U.S. stores in March 2018.
Increasing competition from Amazon and other retailers
It has been widely reported that Toys R Us went out of business because of increasing competition from Amazon and other retailers. While this may have been a contributing factor, it is not the whole story. The company was also burdened with a heavy debt load, which made it difficult to invest in new stores and inventory. In addition, the company was slow to adapt to changing consumer habits, such as the increasing preference for online shopping.
A failed turnaround strategy
In 2004, Toys “R” Us embarked on a turnaround strategy under the guidance of CEO Jerry Storch. The company closed underperforming stores, reformed its debt, and poured money into customer service and new initiatives like its “R” Us Outlet stores.
The strategy was successful for a time, but by 2012 it was clear that Toys “R” Us was in trouble again. Competitors like Amazon and Walmart were eating into its market share, and the company was saddled with $5 billion in debt. In September 2017, Toys “R” Us filed for bankruptcy.
The company made a number of missteps that led to its demise. First, it failed to invest enough in e-commerce. As consumers shifted their shopping habits online, Toys “R” Us fell behind. Second, the company didn’t do enough to differentiate itself from its competitors. In an increasingly competitive market, Toys “R” Us couldn’t compete on price or selection. Finally, the company’s debt load proved to be crushing. As interest payments began to eat into profits, there was no room for error.
The death of Toys “R” Us is a cautionary tale for other retailers. In today’s economy, companies must be nimble and adaptable to survive.
The death of Geoffrey the Giraffe
It’s the end of an era. Toys “R” Us, the toy retailer that has been a mainstay for generations of children, announced that it is going out of business. The company filed for bankruptcy in September, but it was unable to find a buyer or restructure its debt. This leaves more than 30,000 people without a job and uncertain future.
The company’s problems were many, but one contributing factor was the death of Geoffrey the Giraffe, its longtime mascot. In 2015, Toys “R” Us replaced Geoffrey with a new mascot, a cartoon character named Tru by his sidekick, Josie Bear. The change was intended to modernize the company’s image and attract millennial parents, but it backfired. Geoffrey was beloved by generations of children and his death was met with mourning online. The new mascots were unable to fill the void left by Geoffrey and failed to connect with consumers.
In addition to losing its connection to its customers, Toys “R” Us also lost its edge as a retailer. It was slow to embrace e-commerce and failed to compete with Amazon and other online retailers. It also overexpanded in recent years, opening too many stores at a time when shoppers were increasingly moving online. These factors all contributed to the company’s demise.
The death of Toys “R” Us is a sad moment for those who grew up with the store as a part of their childhood. It’s also a reminder of how quickly changes in technology and consumer behavior can upend even the most established businesses
The company’s final days
In the company’s final days, Toys “R” Us was losing money and struggling to pay its debts. The company filed for bankruptcy in September 2017, and by March 2018, it announced that it would close all of its stores in the United States.
There are several reasons why Toys “R” Us went out of business. One reason is that the company was saddled with a large amount of debt. Another reason is that Toys “R” Us was not able to keep up with changes in the toy industry, such as the rise of online retailers like Amazon.com.
The death of Toys “R” Us is a sad story, but it’s also a cautionary tale about the dangers of debt and the importance of staying relevant in a changing marketplace.
The legacy of Toys “R” Us
Toys “R” Us was once the go-to destination for children and adults seeking the latest and greatest toys. But in 2018, the company filed for Chapter 11 bankruptcy protection, and by 2019, all Toys “R” Us stores in the United States were closed. So what happened?
There are a few reasons cited for the company’s decline. First, Toys “R” Us was saddled with $5 billion in debt from a leveraged buyout in 2005. This made it difficult for the company to invest in its stores and keep up with competitors like Amazon and Walmart.
In addition, the rise of digital media led to a decrease in demand for physical toys. And finally, Toys “R” Us was Slow to embrace e-commerce—a mistake that proved fatal in an age when consumers can buy anything they want with the click of a button.
Though Toys “R” Us is gone, its legacy lives on in the memories of those who grew up shopping at its stores. For many, Toys “R” Us was more than just a place to buy toys—it was a magical kingdom where childhood dreams came true.