I wonder though, that even if they restart Toys R Us, won’t the same problems which caused issues for the company still be there?
Which is why Pan-Am isn’t flying today.
My understanding is that Toys R Us would have been a profitable operation right up to the end, except for the negative cash flow to pay off its massive debt when it was sold to private equity firms in 2005.
“I wonder though, that even if they restart Toys R Us, won’t the same problems which caused issues for the company still be there?”
I think that it would restart debt free. However, the big problem wasn’t that they just made a bad decision or two and ended up in debt. The business they were in has been overcome by more agile competitors. When they started Toys R Us, I think there were no real competitor toy stores. Now, there are toys in Walmart and just about every store. Also, the type of toy has changed to be more electronic and less Tonka. Another factor is that there are fewer children now than there were in the beginning. Also, there’s the fact that anyone online and without the expense of a brick and mortar store can offer a toy cheaper and delivered to your door.
If somebody thinks they can bring back Toy’s R Us and make it competitive, they’d have to have a really new marketing idea. I just don’t see it happening. (Though, running a debt free company might make a few people rich for a while.)
Their trouble started once they used Chinese suppliers. Rough and tumble Hot Wheels toys became flimsy, broken within a minute of play. The same thing happened to everything else in that store. Rebuild the American supply chain and keep durable toys on the shelf. People will purchase good stuff.
With the Internet and other lifestyle changes they will need to reconfigure their operations but, no.
When Toys R Us was purchased via the leveraged buyout by those three investment firms they were immediately saddled with the billions that were borrowed by the firms for their purchase. They were immediately placed into so much debt they could do nothing to to survive.
They may be able to come back as a smaller and leaner operation that could survive as both a brick and mortar operation as well as an Internet seller.
I think T-R-U failed because of mismanagement, not because of lack of market. If Party City is going to open “Toy City” they obviously see an opportunity.
I’m surprised that TRU’s suppliers allowed them to rack up as much debt as they did.’