Toys R Us Reveals More Closure Details; KB Toys and Others Eye US Toy Market Vacuum
Per Business Insider, Toys R Us has indicated that all locations are scheduled for closure, while hoping to sell 200 of its top locations before their closure dates. Full liquidation sales are expected to roll out, possibly beginning this week. Meanwhile, zombie brand KB Toys may jump to roll out a brick and mortar presence for next year’s holiday season.
Per CNN Money, Toys R Us pins its insolvency on a 2017 holiday season that fell “well below worst case projections” – specifically, a quarter of the previous year’s holiday sales. The company had continued to struggle with debt since its leveraged buyout in 2005, and now simply does not have the funds available to keep stores open past May. Its more than 800 locations will close, leaving 30,000 employees laid off. The collapse leaves questions about the future of the material assets and employees – that is, the stores themselves – as well the brand name and intellectual property, and the industry that the company has served as a flagship for.
Business Insider reports that in states covered by the WARN Act, where advance warning of mass layoffs is required by law, stores and warehouses have been scheduled for a May 14 shutdown (the required 60 days notice from the release.) (Meanwhile, CNN Money reports a Toys R Us statement that stores should remain open for “at least” two months.) Other reports include locations said to be launching liquidation sales as soon as Thursday (March 22), with such stores reported to be set to close “as soon as all of the merchandise [is] sold”. Bankruptcy hearing developments this week may lead to further developments.
Business Insider also toured a closing Babies R Us location for a short photo essay to illustrate the on-the-ground realities of liquidation sales, from which we’ve borrowed the evocative header image above.
Vegas Inc reports that many of the physical locations are ready for acquisition by other retailers not necessarily in the toy industry, while other “low-quality” locations with ill-suited facilities may simply lie vacant. Bloomberg indicates that Amazon.com has shown some interest in acquiring some of the locations, but that it’s too early to predict whether anything might materialize.
It’s still to be seen whether the Toys R Us name and brand will be sold along with the shelving. Prior attempts by Toys R Us to sell the business as a whole were unsuccessful, and it’s unclear whether Bratz maker MGA Entertainment will successfully purchase the Canadian arm. But Reuters reports speculation that the branding itself will likely be picked up by an online retailer, which might in turn acquire some locations to apply the brand to a brick and mortar “showroom” presence.
Meanwhile, another valuable brand associated with childhood dreams more than any material assets is eying the vacuum potentially left by the biggest toy chain in the US, per the New York Post: KB Toys. The toy chain ceased to exist through its own liquidation process in 2007-2009, its IP assets purchased by none other than Toys R Us; the brand was later picked up by a California company named Strategic Marks after the KB Toys trademarks were simply left to expire. While the resurrected brand was originally intended to be applied to – what else? – another online retail entity, Ellia Kassoff, CEO of Strategic Marks, intends to shift gears to a brick and mortar presence and “open as many stores as possible” before this year’s holiday season in light of the space to be left by Toys R Us.
It’s still impossible to predict, of course, the repercussions of this collapse for the many toy manufacturers whose stocks have fallen slightly with the news, and particularly the smaller and yet-to-come toy companies who depend on showroom stores as incubators to establish their brands – to say nothing of those 30,000 employees to be laid off. How successfully new retail entities – whether under the Toys R Us, KB Toys, or any other brand – will step in to fill the space for each of these parties, and how much of the industry and especially those smaller toy manufacturers shift to online venues, remains to be seen.
What does all of this mean for the future of toys, retail, and toys at retail in the US? You can share your thoughts, speculation, and feelings on the Allspark Forums in our Toys R Us bankruptcy and KB Toys revival threads, or come chat it out in realtime on our Discord server.