OT: Toys "R" Us could go out of business next week

[BobPSU92]

See the link below. From the article:

"Bankrupt retailer Toys "R" Us may shut all its US stores as soon as next week, according to several reports.

That's terrible news for the two biggest publicly traded toy companies. Investors are clearly preparing for the worst. Shares of Hasbro (HAS) fell 3.5% Friday morning while Mattel (MAT) plunged 7%.

Smaller toy company Jakks Pacific (JAKK) fell nearly 5% too. Canada's Spin Master, which owns the popular line of Hatchimals toys, was down about 3% as well on the Toronto Stock Exchange.

And everything isn't awesome for privately held European toy giant Lego either. The plastic bricks maker reported its first sales drop in thirteen years earlier this week. So these are clearly tough times for the toy makers."

http://money.cnn.com/2018/03/09/investing/toys-r-us-closing-hasbro-mattel/index.html

Is Toys "R" Us too big to fail?

 

[anon_xdc8rmuek44eq]

See the link below. From the article:

"Bankrupt retailer Toys "R" Us may shut all its US stores as soon as next week, according to several reports.

That's terrible news for the two biggest publicly traded toy companies. Investors are clearly preparing for the worst. Shares of Hasbro (HAS) fell 3.5% Friday morning while Mattel (MAT) plunged 7%.

Smaller toy company Jakks Pacific (JAKK) fell nearly 5% too. Canada's Spin Master, which owns the popular line of Hatchimals toys, was down about 3% as well on the Toronto Stock Exchange.

And everything isn't awesome for privately held European toy giant Lego either. The plastic bricks maker reported its first sales drop in thirteen years earlier this week. So these are clearly tough times for the toy makers."

http://money.cnn.com/2018/03/09/investing/toys-r-us-closing-hasbro-mattel/index.html

Is Toys "R" Us too big to fail?

First Walmart came and took a big chunk of business, then Amazon put the nail in the coffin. Was listening to NPR's 'Marketplace' the other day and they mentioned how Toys R Us was bought by private equity firms a while ago using a 'leveraged buyout.' My understanding of that is the firms borrow money to buy the business, try to restructure them to be more cost efficient, and then stick said business with the debt as a result. It's like robbing Peter to pay Paul but the investment firms make sure they get their money first.

In 2004, after years of flat sales and falling profits, the Toys R Us board of directors put the company up for sale.

The buyers were a group of private equity firms. Those are investment firms that bundle together money from investors to buy companies, fix them up by cutting costs and increasing sales, and then sell them or take them public to cash out.

“They make money the old-fashioned way,” said Donna Hitscherich, a professor at Columbia Business School. “You buy low and you sell high. So you try to find an opportunity that you can improve upon."

And to really get what happened with Toys R Us, you need to understand how these private equity purchases work. They rely on something called a leveraged buyout.

“Leverage just means you're using lots of debt,” said Eileen Appelbaum, co-director of the Center for Economic and Policy Research.

If a private equity firm wants to buy a company, it’ll put up a small portion of the money. Then it’ll go to the bank and borrow the rest.

The key? “They put the debt on the company they buy,” Appelbaum said.

In other words, the firms take out these loans, buy a company and then make that company pay the loans back.

In 2005, the Toys R Us board of directors sold the company for $6.6 billion to the private equity firms Bain Capital and KKR and the real estate investment firm Vornado. The firms put up about 20 percent of the total and borrowed the rest.

Toys R Us became a private company with more than $5 billion in debt. And then things went off the rails.

“The beginning of the problems for Toys was that Amazon.com exploded,” said Charlie O’Shea, lead retail analyst at Moody’s.

The private equity firms’ investors haven’t made money off this deal. But the firms themselves have. It’s unclear where Vornado ended up. But after collecting fees from Toys R Us, Bain and KKR each took home at least $15 million.

 

[Cletus11]

Like what person didn't see that coming a mile away. Was in a Toy's R Us about a month ago in the evening, maybe 2 other families in the store.

I think there is only going to continue to be more and more closings of brick and mortar stores as everything is going on line now. Nobody under the age of 30 shops in store and most people under the age of 50 have mainly transitioned to on line buying. So brick and mortar is only going to get worse year over year.

Only brick and mortar left will be more specialty stores where people want to talk to knowledgeable sales people and physically see things before purchasing them.

Next question is when does grocery stores and the food delivery nexus occur.

 

[Art]

Like what person didn't see that coming a mile away. Was in a Toy's R Us about a month ago in the evening, maybe 2 other families in the store.

I think there is only going to continue to be more and more closings of brick and mortar stores as everything is going on line now. Nobody under the age of 30 shops in store and most people under the age of 50 have mainly transitioned to on line buying. So brick and mortar is only going to get worse year over year.

Only brick and mortar left will be more specialty stores where people want to talk to knowledgeable sales people and physically see things before purchasing them.

Next question is when does grocery stores and the food delivery nexus occur.

Yup, frequently drive by the local Toys R Us and the parking lot is almost always empty.

 

[BobPSU92]

Like what person didn't see that coming a mile away. Was in a Toy's R Us about a month ago in the evening, maybe 2 other families in the store.

I think there is only going to continue to be more and more closings of brick and mortar stores as everything is going on line now. Nobody under the age of 30 shops in store and most people under the age of 50 have mainly transitioned to on line buying. So brick and mortar is only going to get worse year over year.

Only brick and mortar left will be more specialty stores where people want to talk to knowledgeable sales people and physically see things before purchasing them.

Next question is when does grocery stores and the food delivery nexus occur.

Kids are impulsive, and there is a market to satisfy that impulsiveness. (That doesn't mean the kid is spoiled, by the way.) Maybe the market is shrinkage, but it's still there. Plus parents need a place to get their child's friend's birthday gift on short notice. If Toys "R" Us goes under, there still will be Target and Wal-Mart and independent toy stores.

 

[Nitt1300]

First Walmart came and took a big chunk of business, then Amazon put the nail in the coffin. Was listening to NPR's 'Marketplace' the other day and they mentioned how Toys R Us was bought by private equity firms a while ago using a 'leveraged buyout.' My understanding of that is the firms borrow money to buy the business, try to restructure them to be more cost efficient, and then stick said business with the debt as a result. It's like robbing Peter to pay Paul but the investment firms make sure they get their money first.

In 2004, after years of flat sales and falling profits, the Toys R Us board of directors put the company up for sale.

The buyers were a group of private equity firms. Those are investment firms that bundle together money from investors to buy companies, fix them up by cutting costs and increasing sales, and then sell them or take them public to cash out.

“They make money the old-fashioned way,” said Donna Hitscherich, a professor at Columbia Business School. “You buy low and you sell high. So you try to find an opportunity that you can improve upon."

And to really get what happened with Toys R Us, you need to understand how these private equity purchases work. They rely on something called a leveraged buyout.

“Leverage just means you're using lots of debt,” said Eileen Appelbaum, co-director of the Center for Economic and Policy Research.

If a private equity firm wants to buy a company, it’ll put up a small portion of the money. Then it’ll go to the bank and borrow the rest.

The key? “They put the debt on the company they buy,” Appelbaum said.

In other words, the firms take out these loans, buy a company and then make that company pay the loans back.

In 2005, the Toys R Us board of directors sold the company for $6.6 billion to the private equity firms Bain Capital and KKR and the real estate investment firm Vornado. The firms put up about 20 percent of the total and borrowed the rest.

Toys R Us became a private company with more than $5 billion in debt. And then things went off the rails.

“The beginning of the problems for Toys was that Amazon.com exploded,” said Charlie O’Shea, lead retail analyst at Moody’s.

The private equity firms’ investors haven’t made money off this deal. But the firms themselves have. It’s unclear where Vornado ended up. But after collecting fees from Toys R Us, Bain and KKR each took home at least $15 million.

Not all pirates go to sea

 

[psuro]

Will they have to change their name to "Toys 'Rn't Us'?


Thank you. I will see myself out.

 

[Cletus11]

Kids are impulsive, and there is a market to satisfy that impulsiveness. (That doesn't mean the kid is spoiled, by the way.) Maybe the market is shrinkage, but it's still there. Plus parents need a place to get their child's friend's birthday gift on short notice. If Toys "R" Us goes under, there still will be Target and Wal-Mart and independent toy stores.

a quick gift for a child's Bday is getting a gift card at CVS or your local mini-mart in most cases. Target and Walmart stores will be the last too fall as they have so many items and are diversified in sales, plus they both have on-line buying and people want to return things. But i guarantee within 10 years there will be WalMart and Target store closing's such that the amount of stores will decrease and the brick and mortar Walmart/Target will serve a larger geographical area.

 

[BobPSU92]

Will they have to change their name to "Toys 'Rn't Us'?


Thank you. I will see myself out.

They should have been We Are Toys all along. Would have been a good cheer at sales meetings too.

 

[NittPicker]

The private equity firms’ investors haven’t made money off this deal. But the firms themselves have. It’s unclear where Vornado ended up. But after collecting fees from Toys R Us, Bain and KKR each took home at least $15 million.

Maybe Mitt Romney can explain how it works.

 

[PeetzPoolBoy]

I'm actually a proponent of implementing a Federal Sales Tax on all internet purchases that are not already taxed at the State level. I love the cyber-economy, but it's an unlevel playing field.

 

[psuro]

They should have been We Are Toys all along. Would have been a good cheer at sales meetings too.

Then they would have had to change their name to "We Aren't Toys". You just can't get away from it.

 

[jughead212]

I'm actually a proponent of implementing a Federal Sales Tax on all internet purchases that are not already taxed at the State level. I love the cyber-economy, but it's an unlevel playing field.

Can't Toys R Us sell its junk on the internet?

 

[Obliviax]

years ago, they were a shop that was one of our top references as they were one of the first to install bar codes to do analytics to anticipate shelf space, activity and seasonal shifts.

Circuit City suffered the same fate. I remember all kinds of high fidelity shops being everywhere in my youth. (Tokyo Shapiro being my favorite at the store was owned by a Jewish family selling mostly Japanese products). Sears is all but gone as well.

Quite a war about to take place with Costco-ish and WholeFoods/Amazon. Retailers are trying to balance brick&mortar with digital presence. Interesting times, indeed.

 

[jughead212]

First Walmart came and took a big chunk of business, then Amazon put the nail in the coffin. Was listening to NPR's 'Marketplace' the other day and they mentioned how Toys R Us was bought by private equity firms a while ago using a 'leveraged buyout.' My understanding of that is the firms borrow money to buy the business, try to restructure them to be more cost efficient, and then stick said business with the debt as a result. It's like robbing Peter to pay Paul but the investment firms make sure they get their money first.

In 2004, after years of flat sales and falling profits, the Toys R Us board of directors put the company up for sale.

The buyers were a group of private equity firms. Those are investment firms that bundle together money from investors to buy companies, fix them up by cutting costs and increasing sales, and then sell them or take them public to cash out.

“They make money the old-fashioned way,” said Donna Hitscherich, a professor at Columbia Business School. “You buy low and you sell high. So you try to find an opportunity that you can improve upon."

And to really get what happened with Toys R Us, you need to understand how these private equity purchases work. They rely on something called a leveraged buyout.

“Leverage just means you're using lots of debt,” said Eileen Appelbaum, co-director of the Center for Economic and Policy Research.

If a private equity firm wants to buy a company, it’ll put up a small portion of the money. Then it’ll go to the bank and borrow the rest.

The key? “They put the debt on the company they buy,” Appelbaum said.

In other words, the firms take out these loans, buy a company and then make that company pay the loans back.

In 2005, the Toys R Us board of directors sold the company for $6.6 billion to the private equity firms Bain Capital and KKR and the real estate investment firm Vornado. The firms put up about 20 percent of the total and borrowed the rest.

Toys R Us became a private company with more than $5 billion in debt. And then things went off the rails.

“The beginning of the problems for Toys was that Amazon.com exploded,” said Charlie O’Shea, lead retail analyst at Moody’s.

The private equity firms’ investors haven’t made money off this deal. But the firms themselves have. It’s unclear where Vornado ended up. But after collecting fees from Toys R Us, Bain and KKR each took home at least $15 million.

LBO firms also borrow additional money to pay themselves dividends or management fees. By the time they are done the company is a disaster but the new owners have been paid back plus a healthy profit. In the retail space same thing has happened to Sears, JCP, KMart and Sports Authority.

Not a retailer, but this story of a leveraged buyout tells the story of these often very destructive deals.

https://www.theatlantic.com/business/archive/2017/03/lancaster-ohio-glass-house/519351/

 

[Langmuir]

My local Toys R Us is terrible. Every single person working there has a nasty attitude. I know working retail is tough but I don't see the nasty attitude at Target and other places. A few years ago I was there buying something and got caught beyond somebody that took up their offer for a credit card. There was only one cashier lane open and nobody seemed to care that the line was backing up. I waited about 5 minutes and then put my stuff down and left. I avoid that store like the plague. I say good riddance.

 

[john4psu]

As a result, will more elves become dentists?

 

[PeetzPoolBoy]

Can't Toys R Us sell its junk on the internet?

Yes, but anything you purchase will likely be taxed because they have a physical store in your state. My point is that many internet retailers enjoy an unfair advantage in not having to charge sales tax which makes it that much more difficult for brick and mortar establishments to compete.

 

[BobPSU92]

Then they would have had to change their name to "We Aren't Toys". You just can't get away from it.

True. I just demand proper grammar.

 

[LemonEars]

I have a Best Buy and Toys R Us close by. When I want to buy something I go there, look over the products, and then go home and buy what I want from EBay or Amazon. Big box stores are going away. They have become showrooms for online stores who don't have to pay the giant cost of having a big box store.

 

[Obliviax]

I have a Best Buy and Toys R Us close by. When I want to buy something I go there, look over the products, and then go home and buy what I want from EBay or Amazon. Big box stores are going away. They have become showrooms for online stores who don't have to pay the giant cost of having a big box store.

I used to...best buy has a price match policy. I just upgraded my wifi with a wifi mesh product named Amplifi. I went to BB, Amazon page printed off and in hand, and they matched the price. It was only about a ten dollar difference. Also, on black friday, I bought a 55 in 4G LG for $349. They have one right now, a 49" HD (non 4g) for $299...hard to beat that.

 

[Cletus11]

I have a Best Buy and Toys R Us close by. When I want to buy something I go there, look over the products, and then go home and buy what I want from EBay or Amazon. Big box stores are going away. They have become showrooms for online stores who don't have to pay the giant cost of having a big box store.

exactly. sometimes even makes me feel bad that i do so. but most times no tax buying over the internet combine with shopping for the best deal can easily save at least 25% on the purchase.

 

[Zenophile]

Can't Toys R Us sell its junk on the internet?

No. But John Bobbitt could.

 

[ivan brunetti]

Video made back when the trouble was in an earlier stage.

 

[CDLionFL]

So much for turning that frown upside down.

 

[Lionguy32]

I'm actually a proponent of implementing a Federal Sales Tax on all internet purchases that are not already taxed at the State level. I love the cyber-economy, but it's an unlevel playing field.

As if we don't already pay enough taxes.......

 

[cment]

The private equity firms’ investors haven’t made money off this deal. But the firms themselves have. It’s unclear where Vornado ended up. But after collecting fees from Toys R Us, Bain and KKR each took home at least $15 million.

Maybe Mitt Romney can explain how it works.

If Bain and KKR made less than 100m each on the investement, they lost money.

 

[cment]

First Walmart came and took a big chunk of business, then Amazon put the nail in the coffin. Was listening to NPR's 'Marketplace' the other day and they mentioned how Toys R Us was bought by private equity firms a while ago using a 'leveraged buyout.' My understanding of that is the firms borrow money to buy the business, try to restructure them to be more cost efficient, and then stick said business with the debt as a result. It's like robbing Peter to pay Paul but the investment firms make sure they get their money first.

In 2004, after years of flat sales and falling profits, the Toys R Us board of directors put the company up for sale.

The buyers were a group of private equity firms. Those are investment firms that bundle together money from investors to buy companies, fix them up by cutting costs and increasing sales, and then sell them or take them public to cash out.

“They make money the old-fashioned way,” said Donna Hitscherich, a professor at Columbia Business School. “You buy low and you sell high. So you try to find an opportunity that you can improve upon."

And to really get what happened with Toys R Us, you need to understand how these private equity purchases work. They rely on something called a leveraged buyout.

“Leverage just means you're using lots of debt,” said Eileen Appelbaum, co-director of the Center for Economic and Policy Research.

If a private equity firm wants to buy a company, it’ll put up a small portion of the money. Then it’ll go to the bank and borrow the rest.

The key? “They put the debt on the company they buy,” Appelbaum said.

In other words, the firms take out these loans, buy a company and then make that company pay the loans back.

In 2005, the Toys R Us board of directors sold the company for $6.6 billion to the private equity firms Bain Capital and KKR and the real estate investment firm Vornado. The firms put up about 20 percent of the total and borrowed the rest.

Toys R Us became a private company with more than $5 billion in debt. And then things went off the rails.

“The beginning of the problems for Toys was that Amazon.com exploded,” said Charlie O’Shea, lead retail analyst at Moody’s.

The private equity firms’ investors haven’t made money off this deal. But the firms themselves have. It’s unclear where Vornado ended up. But after collecting fees from Toys R Us, Bain and KKR each took home at least $15 million.

LBO firms also borrow additional money to pay themselves dividends or management fees. By the time they are done the company is a disaster but the new owners have been paid back plus a healthy profit. In the retail space same thing has happened to Sears, JCP, KMart and Sports Authority.

Not a retailer, but this story of a leveraged buyout tells the story of these often very destructive deals.

https://www.theatlantic.com/business/archive/2017/03/lancaster-ohio-glass-house/519351/

For arguments sake, those companies you mentioned would have died years ago without PE and LBO opportunities. Granted LBO's are a unique mechanism.

Who do you think funded Amazon, Tesla, etc for the past 10-15 years as they were/are losing money hand over fist? VC is the same as PE when you get down to it.

Without PE, Chrysler/Dodge/ would not be here today.

Private Equity does more good than harm. The phones, apps, and most techhnology was not funded soley by the founder/inventor.

You take PE out of the economy and the global economy would hit rock bottom fast. For better or worse, it drives the world economy.

 

[anon_xdc8rmuek44eq]

For arguments sake, those companies you mentioned would have died years ago without PE and LBO opportunities. Granted LBO's are a unique mechanism.

Who do you think funded Amazon, Tesla, etc for the past 10-15 years as they were/are losing money hand over fist? VC is the same as PE when you get down to it.

Without PE, Chrysler/Dodge/ would not be here today.

Private Equity does more good than harm. The phones, apps, and most techhnology was not funded soley by the founder/inventor.

You take PE out of the economy and the global economy would hit rock bottom fast. For better or worse, it drives the world economy.

Ok. I wasn't passing judgment either way - just sharing a story I heard from NPR (whose writers I respect). Having said that, VC is not the same as LBO - sure, both invest in companies, but VC's typically invest in start-ups with high growth potential and they typically do not seek more than 50% equity in a company. LBO's seek significant or 100% ownership of mature companies using debt to finance operations and hedge bets in case of a bust. Certainly, Amazon, Tesla, etc. are completely different animals than Toys R Us and were financed in completely different ways.

 

[cment]

Toy's R Us was dead before PE. The hope was to transform their legacy e-commerce system and online marketing. The project failed for only a few reasons. Management was not one of them. Migrating the legacy e-commerce system to new one was the major flaw.

LBO's are a almost extincted now. Hostile take overs are like unicorns these days.

VC's do not seek control individual, but collectively they can gain control of a company. They are looking for early exit.

PE looks for established companies that can be more profitable with modification.

 

[MtNittany]

As to the tax issue - what we need is a National Consumption Tax. The Fair Tax.

No one has the balls to implement it though (or does he?). The IRS should be put out to pasture.