Question

Toys “R” Us® a once mega popular retail toy store declared Chapter 11 bankruptcy several weeks ago. Using contemporary business vocabulary answer the questions posted below.

1. Provide a history of the Toys “R” Us® business.       

2. Provide an analysis of the current condition of Toys “R” Us®. Please focus on the recent bankruptcy filing and detail the reasons that compelled Toys “R” Us® to declare bankruptcy.  

Answer 1

Charles Lazarus in 1957 started Toys “R” Us. Initiating in 1948 with children’s furniture, Charles added toys and these toys became the brand image and the important product. Its headquarter is in New Jersey, USA. It has its stores all over the world. It was a market player with its mascot Geoffrey Giraffe became very popular. After Toys R Us, it started with ‘Babies R Us’, ‘Kids R Us’. With 800 stores in USA and 800 stores outside the USA, it was blooming but things changed it went bankruptcy on September 18, 2017, and in March it declared the stores in the UK will close along with 735 stores in the USA. In one time of its business, it was regarded as category killer which not only pushes competition with the large stores also was a threat to small outlets. But with Walmart, Target, and Amazon as players in the toy market, for the first time, it lost its shares to Walmart. There were some structural changes by bringing in John Eyler in 2000 to improve its operation but this management change was unsuccessful. In 2005, there was a leveraged buyout of the company and after that, it became a private entity.   In 2013, the company did not have profit and after that starts the journey of loss. For consecutive years, it ended up with US$126 million loss. On December 2017, the company liquidated by closing 26 stores in the UK as insolvency restructuring under the company voluntary arrangement. On February 2018, 3200 jobs were at risk in the UK. In April, it stopped trading in the UK. And later it announced that all its operations in the USA will also stop.   

Many of the companies like MGA Entertainment, GoFundMe, Smyths, Fairfax Financial Holdings are coming forward to purchase their companies in different countries. With these chronic losses, they are opting for closing down sale discounts up to 70% off on everything. After analyzing the condition of Toys R Us, I felt these are some of the major things that went wrong

1. The company liabilities were too high and kept on increasing
2. The timings of the holiday shopping season went completely wrong.
3. The competitors were very competitive and it could not survive