Looking for going out of shops? Got unused gift cards? Here's what buyers need to know when Toys R Us closes its stores.
Toys R Us has confirmed on Thursday that it intends to shut down all of its US stores to keep the 200 best locations alive after the best plans for surviving Chapter 11 have failed
ago A few months ago, David Brandon, CEO of Toys R Us, had defined the goal of improving online sales, renovating shops and introducing Augmented Reality to the shopping experience.
Yes, a few hundred stores like that Close to help the rest get well. But to close them all? That was never on the cards.
Thus, the sharp fulcrum of the enterprise from reorganization to liquidation was a staggering turn of events.
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Looking back, however, the pitfalls stumbling upon Toys R Us are clearer:
1. The company's debts were too hard to bear.
Toys R Us was burdened with high debts that Bain Capital and other companies acquired in 2005.
When the company went bankrupt in 2017, it still had debts of about $ 5 billion.
These debt payments turned out to be a metaphorical anchor around the long neck of mascot Geoffrey the Giraffe.
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Toys R Us "That was a disadvantage from the outset because of the debt burden," said Douglas C. Bernstein, a Plunkett – Cooney insolvency lawyer who was not involved in the case was.
. 2 Terrible Timing
The fact that Toys R Us had to declare bankruptcy in September instead of shortly after the Christmas business turned out to be catastrophic. It was extreme misfortune.
Bankruptcy was an epic distraction at a time when the company needed to focus on holding a busy holiday season.
And not just for executives and employees. For customers too.
Yes, Americans are used to visiting bankrupt companies – several airlines and car companies have survived bankruptcies, and the reliability of their services is much more important than good toys.
But in an industry where return is the key Cards are becoming increasingly important, any reason to question the future of a trader during the holidays is enough to shop elsewhere.
And with good reason. Toys R Us now accepts gift cards until mid-April.
The insolvency after the holidays would have been ideal. But the company's hand was effectively forced after rumors of struggles led suppliers to temporarily tighten product conditions for fear of suffering heavy losses.
. 3 The competition put the heat up.
The demise of Toys R Us is just another indication that retail is a highly competitive business.
When Toys R Us was in for the countdown, the company's main competitors smelled blood in the water
Amazon, Walmart and Target raised all toy discounts during the holidays, Toys R Us said in a lawsuit
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These rebates helped Toys R Us get ready at a time when there was an urgent need to stack profits, the company said.
Amazon, Walmart and Target rated toys "too low-margin or loss-leader" during Christmas shopping and offered aggressive online shipping options, said Toys R Us in a court case.
The retailer "just could not keep up with these prices because he" relies solely on toys for profit.
"The holiday season was catastrophic for Toys R Us," said Debtwire analyst Joshua Friedman, "It has somehow killed any hope of a reorganized, entire Toys R Us."
In Retail Nervousness Infectious.
Although details were unclear, Toys R Us said it faced unexpected "delays and disruptions" in product supply during its bankruptcy.
When the company rocked, sellers apparently worried that the company was making the promised payments
This is a recipe for a snowball fight in retail.
For creditors realizing their investments are lost, "it's better to take the lumps today, kick the can with hope on that it will get better in a few years, "said Bernstein.
5. This time was different.
The bankruptcy filing that took place in September was the Christmas shopping time for Toys R Us is absolutely crucial.
And it was. But the 2017 Christmas business was different than any other.
Between Thanksgiving and Christmas, Toys R Us said it's usually "good against the competition because of significant inventory offerings" and "a strategy of late sale with high margins" competitors sell out of "hot" inventory and lure load Minute buyers who fear that online deliveries will not be timely.
Not this time.
"This year, however, was different," Toys R Us said. "As a result of a general decline in toy sales, competitors had full product offerings and warranties for delivery by the end of the Christmas season or on the two-day event calmed customers' fears regarding online shopping. "
Follow USA TODAY reporter Nathan Bomey on Twitter @ NathanBomey .
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October 22, 2019
October 22, 2019