The news came in earlier today that Toys R Us was closing all stores in the U.K., and now the official word has dropped that all U.S. stores will be either sold or closed as well. The move will affect as many as 33,000 jobs as the company winds down its operations after six decades. Liquidation proceedings have been officially filed, which you can read in a nice PDF form.
Toys R Us filed bankruptcy six months ago because it has struggled to pay down nearly $8 billion in debt — much of it dating back to a 2005 leveraged buyout — and has had trouble finding a buyer. Reports were coming in earlier this week that the company has stopped payment to its suppliers, which are some of the biggest toy makers in the world.
There is no word on how long it will take to close every store, or if/when liquidations and sales would occur at each location, but according to The Washington Post, their source said that the company told U.S. employees that closures would likely occur over time, and not all at once.
Toys R Us, based in Wayne, N.J., has been struggling for years to pay down billions of dollars in debt as competitors like 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).
Now the question becomes, how does this affect the toy industry as a whole? Could we be seeing the start of the downfall of the toy industry? Or is this just a natural progression to a different, lower cost solution like Amazon and Walmart? Is Amazon and Walmart ready to take up the slack with the loss of Toys R Us, by increasing store space for toys? It seems we have been seeing a decrease in allotted toy space at Walmart over the past few years.
As a collector of DC Comics merchandise, it has been getting harder and harder to find DC Multiverse figures and other DC related toys at Walmart. Maybe this will help put more product on the shelves.
In any case, this is a sad day for the toy industry, and a sad day for those with fond memories of the place where a kid could be a kid…
Here is the official statement from the company:
WAYNE, NJ – March 15, 2017 – Toys“R”Us, Inc. today announced that it has filed a motion seeking Bankruptcy Court approval to begin the process of conducting an orderly wind-down of its U.S. business and liquidation of inventory in all 735 of the Company’s U.S. stores, including stores in Puerto Rico. Toys“R”Us will provide more details about the plans for the liquidation of its U.S. stores and going out of business sales in the near term.
Toys“R”Us also announced that it is pursuing a going concern reorganization and a sale process for its Canadian and international operations in Asia and Central Europe, including Germany, Austria and Switzerland. The Company’s international operations in Australia, France, Poland, Portugal and Spain are considering their options in light of this announcement, including potential sale processes in their respective markets. The Company’s stores in all these international markets are currently open and serving customers.
In connection with the sale process, the motion the Company filed with the Bankruptcy Court included bidding procedures for the Canadian operations. The Company also disclosed that it is engaged in discussions with certain interested parties for a transaction that could combine up to 200 of the top performing U.S. stores with its Canadian operations. While discussions continue on this potential transaction, Toys“R”Us is seeking court approval to implement the liquidation of inventory in all the U.S. stores, subject to a right to recall any stores included in the proposed Canadian transaction.
The previously announced administration of the UK business continues.
Dave Brandon, Chairman and Chief Executive Officer, said, “I am very disappointed with the result, but we no longer have the financial support to continue the Company’s U.S. operations. We are therefore implementing an orderly process to shutter our U.S. operations and will pursue going concern sales or reorganizations of certain of our international businesses, while our other international businesses consider their options.”
Brandon continued, “There are many people and organizations who have remained in our corner every step along the way. I want to thank our extraordinary team members who helped build Toys“R”Us into a global brand. I also want to express my appreciation for my colleagues on our board who have continued to provide support to sustain the brand and our operations throughout the restructuring process. I would also like to thank our vendors who we owe a great deal of gratitude to for their decades of support. This is a profoundly sad day for us as well as the millions of kids and families who we have served for the past 70 years.”
The Company and its advisors are working to minimize the impact of the U.S. liquidation on the Canadian and other international markets. As part of these efforts, the Company is implementing a transition services arrangement for the next 60 days and is developing plans for a potential shared service function to support the international operations going forward.
Additional information regarding the Company’s restructuring process can be obtained by calling the Company’s Information Hotline, toll-free in the U.S. and Canada at (844) 794-3476, or sending an email to toysrusinfo@PrimeClerk.com. Court filings and other documents related to the court-supervised process in the U.S. are available on a separate website administered by the Company’s claims agent, Prime Clerk, at https://cases.primeclerk.com/toysrus.
Kirkland & Ellis LLP is serving as principal legal counsel to Toys“R”Us, Alvarez & Marsal is serving as restructuring advisor and Lazard is serving as financial advisor.
How DC Comics Toy Sales Rank for the First Half of the Year
The NPD has released sales data for the toy industry today, which includes a look at the top 10 toy properties for the months of January to June 2018. The data comes from 13 international markets tracked by The NPD Group. According to the data, DC Comics toys come in at the number nine spot in total toy properties for the first half of 2018.
“Traditional play patterns, collectibles, social media, and innovation are the major themes we saw trending globally in the first six months of the year, and I expect they will continue to accelerate. More than entertainment, brands have been an important trend to move the needle for the industry so far this year,” said Frédérique Tutt, global toys industry analyst at The NPD Group. “Some key themes have also emerged or have been increasing in popularity, such as dinosaurs and unicorns on the one hand, and slime or toilet humour on the other.”
Looking back at the same time frame from 2017, Batman toys as a whole were listed at number 5 on the list. Illustrating the box office effect, declines in Building Sets and Action Figures can be linked to last year’s movie tie-ins, Batman vs Superman: Dawn of Justice, among others. This year, the NPD has combined Batman with the rest of the DC line, which puts them in the number nine spot, a drop of four on the top ten list.
While DC toy sales have dropped year-to-year, the toy industry as a whole saw global sales of collectibles increase by 26%, and now account for 11% of every dollar spent across the total toy industry.
Keep in mind that the second half year sales tend to trend higher due to the holiday season, but with a lack of Toys “R” Us this year, the future is a tad uncertain. Hopefully with Aquaman coming out in December, DC can move up the ladder on the list for the full year.
These numbers could also be an indicator as to why DC isn’t as prominent in the toy aisle compared to Star Wars, Marvel, LEGO and others. Another way to look at it is that maybe DC isn’t as high because they don’t have that prominent shelf space.
As always, leave your thoughts in the comment section below!
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Party City To Open Seasonal Toy City Pop-Up Stores
CNBC is reporting that Party City is planning to launch a new “toy” extension of their business. Starting in September, the company will open up roughly 50 ‘Toy City’ pop-up stores. The current plan is for these to run from September through the holiday 2018 season. In conjunction with this, the plan is for Party City to begin offering a greater selection of toys online. Details for that portion of the business or still to come.
“The creation of a Toy City concept to complement our temporary seasonal retail strategy is a logical extension of our brand; one that will allow us to leverage our existing pop-up store capabilities and capitalize on the category whitespace that has recently been created,” Party City CEO James Harrison said in a statement.
No word on the type of toys that the new Toy City will sell, has been revealed. We can only hope that it will sell traditional items from Mattel, Hasbro, and the like. We will update this with more information as it breaks.
New Details Emerge Surrounding the KB Toys Comeback!
Playcon is an annual toy industry convention, in which the industry’s biggest players gather to discuss the future of the business. This year, Playcon live streamed the Toy Association’s free industry open forum on retail disruption and a changing marketplace. On hand was founder of Strategic Marks, LLC Ellia Kassoff. Strategic Marks is the company behind the resurgence of KB Toys. Kassoff gave the crowd a little information about how KB Toys will be making their comeback.
If you want to read a synopsis without watching the video above, check out some of the highlights below!
Kassoff says that the goal is to bring back KB Toys so it is just the way that people remember it, while giving it a modern upgrade. He says that it will be an 80/20 split with the majority being they way you remembered it. They want the experience that adults had as kids at KB Toys, to be there just like they remember it.
They will start by hiring the key group of people at Toys R’ Us, which they have already been talking with. They will start with 300-400 pop-up stores during this holiday season. The pop-up store idea is twofold. It is a quick way to get out there, but also a quick way to test each market. At the end of January they will evaluate the success of each location and determine whether to keep them or look for new locations that might fit better. The goal for the next 3-4 years is to have 600-800 permanent stores.
They analyzed the problems that Toys R’ Us faced and KB Toys to see what failed and realized it was investors (Bain Capital). Big malls are going to provide the funding for these new pop-up stores. Kassoff said that in the past malls typically disliked KB Toys due to having product out in front and sometimes outside of their available space, but the malls have realized that they need the foot traffic from toys stores.
KB Toys will also be doing a lot of work with collectors, as well as roadshows with some of the toy vendors. They are looking at innovative ways of getting people into toy stores again. Each store will have a “Toy Nerd”, basically someone that is an expert at collecting toys. Someone that likes mint packaging, and knows what collectors want. Kassoff also said that KB Toys will host “meet and greets” to have autograph sessions with toy designers.
There will also be larger “Experience” stores that will have cafes for people to hang out, party rooms (which you can book), and registries for birthdays. This larger store will also be able to cater to smaller toy manufacturers, in that their product will have shelf space, unlike the smaller pop-up stores.
As always, leave your thoughts in the comment section about these upcoming KB Toys pop-up stores.
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