Toy store chain Toys R Us is planning to sell or close all 800 of its U.S. stores, affecting as many as 33,000 jobs as the company winds down its operations after six decades, according to a source familiar with the matter.
The news comes six months after the retailer filed for bankruptcy. The company has struggled to pay down nearly $8 billion in debt — much of it dating to a 2005 leveraged buyout — and has had trouble finding a buyer. There were reports earlier this week that Toys R Us had stopped paying its suppliers, which include the country’s largest toymakers. On Wednesday, the company announced it would close all 100 of its U.K. stores. In the United States, the company told employees closures would likely occur over time, and not all at once, according to the source, who spoke on the condition of anonymity because they were not authorized to discuss internal deliberations.
Toys R Us, once the country’s preeminent toy retailer, has been unable to keep up with big-box and online competitors. The recent holiday season dealt another blow to the embattled company, which struggled to find its footing even as the retail industry racked up its largest gains in years. In January, the retailer announced it would close 182 U.S. stores, or about one-fifth of its remaining Toys R Us and Babies R Us locations.
A group of toymakers led by Isaac Larian, chief executive of MGA Entertainment, the giant behind brands such as L.O.L. Surprise!, Little Tikes and Bratz, on Wednesday submitted a bid to buy Toys R Us’s Canadian arm, which includes 82 stores, according to Larian. He added that he is also looking into buying as many as 400 U.S. stores, which he would seek to operate under the Toys R Us name.
“There is no toy business without Toys R Us,” Larian said, noting that he sold his first product to the chain in 1979. “It’s a big deal and I’m going to try to salvage as much of it as possible.”
According to its September bankruptcy filing, Toys R Us owes MGA Entertainment $21.3 million.
Despite turnaround efforts at Toys R Us, which included adding more hands-on “play labs,” retail experts say the 60-year-old company has been unable to get customers back into its stores. It doesn’t offer the low prices or convenience of some of its larger competitors, nor the fun-filled experience that many smaller outfits do, some analysts have said.
Toys R Us, based in Wayne, N.J., has been struggling for years to pay down billions of dollars in debt as competitors such as Amazon, Walmart and Target win over an increasingly larger piece of the toy market. Its bankruptcy filing last year cited $7.9 billion in debt against $6.6 billion in assets. The company said it has more than 100,000 creditors, the largest of which are Bank of New York (owed $208 million), Mattel ($136 million) and Hasbro ($59 million). (Jeffrey P. Bezos, the founder and chief executive of Amazon, owns The Washington Post.)
The collapse of the storied toy chain raises a number of questions for employees, as well as consumers in the coming weeks. Sen. Charles E. Schumer (D-N.Y.) on Wednesday urged Toys R Us to give customers cash in exchange for their unused gift cards, which he said would be “as worthless and unwanted as a lump of coal in a stocking.”
“The music is about to stop for the iconic retailer,” Schumer said in a statement on Wednesday. “Consumers could be left in the lurch.” He also urged the Federal Trade Commission to “take an immediate look” at how Toys R Us is handling the winding down of its operations.
“The liquidation of Toys R Us is the unfortunate but inevitable conclusion of a retailer that lost its way,” Neil Saunders, managing director of the research firm GlobalData Retail, wrote in an email. “Even during recent store closeouts, Toys R Us failed to create any sense of excitement. The brand lost relevance, customers and ultimately sales.”
Toys R Us got its start as a baby furniture shop in Washington’s Adams Morgan neighborhood in 1948. It didn’t take long for Charles Lazarus, who founded the company at age 25, to realize he could make a lot more money selling toys than one-off cribs at Children’s Bargain Town. He renamed his business Toys R Us and created an emporium of exclusive products and ever-rotating inventory.
“Lazarus offered toy manufacturers the tantalizing picture of year-round toy sales and the ability to produce 12 months a year,” Eric Clark wrote in “The Real Toy Story: Inside the Ruthless Battle for America’s Youngest Consumers.”
At its heyday, Toys R Us had a towering flagship store in New York’s Times Square (now closed and home to Old Navy) and a ubiquitous icon, Geoffrey the Giraffe. Its catchy jingle, with the refrain “I don’t wanna grow up, I’m a Toys R Us kid,” was a long-running television staple.
But in recent years, the company lost its footing as retailers like Walmart and Target began selling toys at lower profit margins. Toys R Us, which was saddled with billions in debt, couldn’t invest enough to keep its stores or websites competitive.
“We know that customers are willing to pay more for an enjoyable experience — just look at the lines at Starbucks every day — but Toys R Us has failed to give us anything special or unique,” Kelly O’Keefe, a professor of brand management at Virginia Commonwealth University, told The Washington Post this year. “You can find more zest for life in a Walgreens.”