Toys "R" Us

### Defunct

April 21, 2018 in Germany, Austria and Switzerland (taken over by Smyths Toys and rebranded)
April 24, 2018 in the United Kingdom
June 19, 2019 in France

## Locations

### Area served

United States
Worldwide

### Headquarters

1 Geoffrey Way, Wayne, New Jersey, United States

**Toys "R" Us**  is an international toy, clothing, and baby product retailer owned by Tru Kids, Inc. (d.b.a. Tru Kids Brands) and various others. It was founded in April 1948, with its headquarters located in Wayne, New Jersey, in the New York metropolitan area.

Founded by Charles Lazarus in its modern iteration in June 1957, Toys "R" Us traced its origins to Lazarus's children's furniture store, which he started in 1948. He added toys to his offering, and eventually shifted his focus. The company had been in the toy business for more than 65 years and operated around 800 stores in the United States and around 800 outside the U.S., although these numbers have steadily decreased with time. At its peak, Toys "R" Us was considered a classic example of a category killer. However, with the rise of mass merchants, as well as online retailers, Toys "R" Us began to lose its share of the toy market.

The company filed for Chapter 11 bankruptcy protection on September 18, 2017, and its British operations entered administration in February 2018. In March 2018, the company announced that it would close all of its U.S. and British stores. The British locations closed in April and the U.S. locations in June. The Australian wing of Toys "R" Us entered voluntary administration on May 22 and closed all of its stores on August 5, 2018. Operations in other international markets such as Asia and Africa were less affected, but chains in Canada, parts of Europe and Asia were eventually sold to third-parties.

The company continues to operate as the licensor of the chain's international operations, but its lenders announced in October 2018 that it planned to re-launch the U.S. Toys "R" Us retail business in the future. The lenders also partnered with Kroger to add "Geoffrey's Toy Box" (named after the chain's mascot) pop-up departments to selected locations in order to give Toys "R" Us a presence during the holiday shopping season. On January 20, 2019, the company emerged from bankruptcy as Tru Kids. To date, there are only two locations open in the United States.

Toys "R" Us is also the toy retailer that has sold the most merchandise of the hit TV show *SpongeBob SquarePants*. With the merchandise from that show alone, the company currently has made over 4,500,864,312 in USD. According to Ralph Bakshi, "If this toy retailer gets shut down, then all of the money made will have been wasted."

## History

### Origins

In April 1948, Charles P. Lazarus founded a baby-furniture retailer, Children's Bargaintown in Washington, D.C., during the post-war baby boom. It was acquired in 1966 by Interstate Department Stores, Inc.

The focus of the store changed in June 1957, and the first Toys "R" Us, dedicated exclusively to toys rather than furniture, was opened by Lazarus in Rockville, Maryland. Lazarus also designed and stylized the Toys "R" Us logo, which featured a backwards "R" to give the impression that a child wrote it.

### 21st century

The board of directors installed John Eyler as CEO (formerly of FAO Schwarz) in May 2000. Eyler launched a plan to remodel and re-launch the chain. Blaming market pressures (primarily competition from Walmart and Target), Toys "R" Us considered splitting its toy and baby businesses. On March 17, 2005, a consortium of Bain Capital Partners LLC, Kohlberg Kravis Roberts (KKR) and Vornado Realty Trust announced a $6.6 billion leveraged buyout of the company. Public stock closed for the last time on July 21, 2005 at $26.75—a 63% increase since when it first announced that the company was put up for sale. Toys "R" Us became a privately owned entity after the buyout. The company still files with the Securities and Exchange Commission, as required by its debt agreements.
A Toys "R" Us/Babies "R" Us combined location in Waterbury, Connecticut, February 2018.
In December 2013, eight days before Christmas, Toys "R" Us announced their stores in the United States would stay open for 87 hours straight. The flagship store of the retailer in Times Square was open for 24 hours a day from December 1 to 24, to cater to tourists. The announcement came after snow and rain caused a nearly 9 percent year-over-year decline in U.S. store foot traffic. This move also pushed the retailer to hire an additional 45,000 seasonal workers to cater to the demand of the extended store hours. Since the toy business is incredibly seasonal, more than 40% of the company's sales come in during the fourth quarter of the year.

In 2014, Toys "R" Us announced its "TRU Transformation" strategy, which concentrated on efforts to fix foundational issues affecting future growth, including making stores less cluttered, improving the customer experience, clearer pricing strategies and promotions, and tighter integration of its retail and online businesses. In 2015, the company launched the first of a new concept store called the "Toy Lab" in Freehold, New Jersey. The new layout provided more space for interactive exhibits and areas to play with new toys before purchase. This concept has since been expanded to stores in California, Delaware, Florida, New York and Pennsylvania.

### Bankruptcy

On September 18, 2017, Toys "R" Us, Inc. filed for Chapter 11 bankruptcy, stating the move would give it flexibility to deal with $5 billion in long-term debt, borrow $2 billion so it could pay suppliers for the upcoming holiday season and invest in improving current operations. The company has not had an annual profit since 2013. It reported a net loss of US$164 million in the quarter ending April 29, 2017. It lost US$126 million in the same period in the prior year. It had been paying US$400 million per-year to service its debt, which prevented it from investing in improvements to in-store experiences to compete with Amazon and Walmart. Although the "retail apocalypse" was a factor, some analysts cited that the rapid increase in debt occurred under its private equity ownership.

It was initially stated that only the U.S. and Canadian operations would be affected, and that its brick-and-mortar stores and online sales sites would continue to operate. In January 2018, the company announced it would liquidate and close up to 182 of its stores in the U.S. as part of its restructuring, as well as convert up to 12 stores into co-branded Toys "R" Us and Babies "R" Us stores.

On February 28, 2018, it was reported that the company was exploring retaining its stronger Canadian operations, and the divestiture of some of its corporate-owned stores to franchises (leaving approximately 200 in a downsized chain). Toys "R" Us Inc. later announced that all U.S. locations would be closed.

On March 15, 2018, Toys "R" Us received approval from the bankruptcy court to liquidate its stores. There were buyers interested in acquiring groups of stores to use as showrooms, as well as others interested in acquiring the chain's brand and associated intellectual property. The company indicated in filings that the Canadian operations were profitable, and desired to preserve the operations of the 82-store chain through a sale. MGA Entertainment had made an offer to acquire the Canadian operations. MGA Entertainment CEO Isaac Larian attempted to raise $200 million through investments and public crowdfunding to purchase at least 400 of the U.S. locations.

Liquidation sales began on March 23, 2018. The chain's online store shut down on March 29, redirecting visitors to information on the liquidation and closures. On April 24, 2018, it was announced that the Canadian division would be sold to Fairfax Financial for approximately $234 million, and would continue to operate the locations under the Toys "R" Us name. Fairfax stated that it was potentially interested in purchasing U.S. locations as an extension of these Canadian operations.

On June 29, 2018, Toys "R" Us shut down all of its remaining U.S. locations, after 70 years of operations. In early July 2018, it was reported that unknown benefactors had bought out all of the remaining stock of two locations in North Carolina so they could be donated to charity.

In November 2018, *Fortune* noted that the absence of the retailer during the 2018 holiday season represented a US$4 billion chunk of toy sales from which other retailers could benefit. Party supply retailer Party City capitalized on the closures by establishing temporary pop-up stores under the branding Toy City—some of which filling vacancies left by Toys "R" Us locations.

#### Europe

On December 4, 2017, the company reported that it would be liquidating and closing at least 26 stores in the United Kingdom as part of an insolvency restructuring known as a company voluntary arrangement. After amassing £15 million in unpaid taxes, Toys "R" Us Limited entered administration on February 28, 2018. On March 2, 2018, it was announced that all UK stores would begin a liquidation sale, and on March 14, 2018, it was announced that all UK stores were expected to close within six weeks. On April 24, 2018, Toys "R" Us stopped trading in the United Kingdom after 34 years of service.

On April 21, 2018, it was announced that UK and Irish rival Smyths would purchase Toys "R" Us stores in Germany, Austria and Switzerland, as well as Toys "R" Us Europe's head office in Cologne. Smyths said that all of the outlets acquired will be rebranded. On April 13, a bid was made by Isaac Larian to buy 356 Toys "R" Us stores for $890 million, but was rejected on April 17 and was fully scrapped on April 23. On July 19, 2019, it was announced that PicWicToys will replace the former Toys "R" Us stores in France.

#### Australia

The Australian wing of Toys "R" Us entered voluntary administration on May 22. On June 20, it was announced that all of their Australian stores will be closing as well. The closure of all stores was concluded on August 5, 2018. Though it has since returned.

#### Asia

While representatives of the Asian arm of Toys "R" Us have consistently cited that they operate as a separate legal entity from the parent company and are unaffected by events at the parent company, Toys "R" Us had engaged in talks since February 2018 to offload Toys "R" Us Asia's majority stake to a bidder for a proposed US$1 billion while outlets in Asia continue to operate unaffected. The planned bid was revised downwards to US$760 million in August and scheduled for September while Toys "R" Us sought a United States court order to strip Fung Retailing, a Hong Kong-based partner managing the majority of Toys "R" Us Asian operations, of its right-of-first-refusal purchase option and force Fung Retailing to release its share of the unit. This follows allegations by Toys "R" Us' of Fung Retailing delaying the sale via court proceedings filed through the Hong Kong judiciary system to discourage rival bidders and acquire Toys "R" Us' share at a lower price; the Eastern District of Virginia bankruptcy court would subsequently issue an order for Fung Retailing to drop its court order for the delay in a September 28, 2018, report.

On November 16, 2018, Toys "R" Us Asia announced that the parent company has formally sold the Asian unit to Fung Retailing and multiple Toys "R" Us lenders at a valuation of US$900 million (later revised to US$760 million), with Fung Retailing receiving an increase in shares of the unit to become the lead shareholder of Toys "R" Us Asia and the unit securing the licensing rights to retain the Toys "R" Us namebrand.

### Restructuring and Tru Kids, Inc.

On October 1, 2018, the company issued a bankruptcy court filing which stated that it would no longer auction off its intellectual property, since its controlling lender planned to "[revive] the business behind the Toys 'R' Us and Babies 'R' Us brand names" with a focus on maintaining existing licensing agreements and establishing new retail opportunities. The company evaluated that selling its brand at auction "[was] not reasonably likely to yield a superior alternative."

At the Toy Industry Association's Fall Toy Preview, the company unveiled plans for a preliminary venture to be known as **Geoffrey's Toy Box**, a wholesale store-within-a-store concept that the company planned to deploy in time for the holiday shopping season. The company planned to revive the Toys "R" Us and Babies "R" Us brands in the future. In November 2018, it was announced that grocery market chain Kroger would add toy displays under the Geoffrey's Toy Box brand to some of its locations, to sell selections of Toys "R" Us private-label products. The brand operates under Geoffrey LLC, an intellectual property holding company within Toys "R" Us.

On January 20, 2019, the company emerged from bankruptcy as Tru Kids.

As of June 21, 2019, the company plans to open new stores in the US slated to be 10,000 square feet, roughly a third of the size of the big box brand that closed in 2018.

On October 8, 2019, Tru Kids announced a partnership with rival Target that relaunches ToysRUs.com ahead of the 2019 holiday season and redirects its shoppers to Target.com once they select the "Buy" button.

On November 27, 2019, Toys "R" Us opened a retail store at Westfield Garden State Plaza in Paramus, New Jersey. On December 7, 2019, a second location was opened at The Galleria in Houston, Texas.