Toys "R" Us was once the dominant retailer of toys in the United States. It debuted as a public company in 1978, with its shares trading on the New York Stock Exchange. In 2005, a group of private equity companies took Toys "R" Us private via a leveraged buyout.

The company struggled under the burden of massive debt amid stiff competition from rivals such as Walmart and Target. In 2017, Toys "R" Us entered bankruptcy protection, and shuttered more than 885 stores in the U.S. the following year after failing to come to a restructuring agreement with creditors.  Lenders took control of the company's iconic brand and formed a new company, Tru Kids Brands, which now operates two Toys "R" Us locations in Houston and Paramus, New Jersey. 

Key Takeaways

  • Toys "R" Us debuted on the New York Stock Exchange in 1978.
  • Private equity groups took the retailer private in 2005 via a leveraged buyout.
  • Toys "R" Us struggled to service its massive debt amid stiff competition from Walmart and Target. It filed for bankruptcy protection in 2017.
  • The company shuttered its U.S. stores in 2018.
  • Lenders took control of the Toys "R" Us intellectual property and started a new company, Tru Kids Brands, which has opened two new stores.

Leveraged Buyout

Charles Lazarus founded Toys "R" Us as a baby furniture store in 1948. He expanded into toys in 1957 and began using the Toys "R" Us name. In 1978, Toys "R" Us went public on the New York Stock Exchange (NYSE). The company was the top toy seller in the United States until 1998, when it lost the title to Walmart (WMT).

In 2005, private equity firms KKR & Co (KKR) and Bain Capital, along with real estate investment trust Vornado Realty Trust, took Toys "R" Us private in a $6.6 billion leveraged buyout. The private equity group outbid rival suitors such as Cerberus Capital, agreeing to pay $26.75 per share for an 8 percent premium, in addition to assuming the company's debt. At the time, Toys "R" Us had more than 1,500 stores worldwide and $11.5 billion in sales, but had been shuttering locations due to stiff competition from Walmart and Target (TGT).

Geoffrey's Last Stand

In 2010, Toys 'R' Us filed for an $800 million an initial public offering (IPO), but poor market conditions forced it to withdraw three years later.  The hiring of David Brandon as chief executive officer in 2015 revitalized hopes the company might finally return to the public markets. Brandon, the athletic director at the University of Michigan, had a history of taking companies public. He spent more than 11 years at Domino’s Pizza (DPZ), helping to steer the company toward an IPO. Before that he ran Valassis Communications, which also went public.

However, the company was forced into Chapter 11 bankruptcy protection in September 2017 as interest payments on debt from the 2005 leveraged buyout began to exact a toll. The retailer had $4.9 billion in outstanding debt, which cost $400 million to service. Its obligations required the store to pay down $1.7 billion in principal.

Store Closures

In January 2018, as part of plans to emerge from its bankruptcy reorganization, Toys "R" Us said it would close 180 stores in the United States, or about 20 percent of the total. By March 2018, the company said it was ready to sell or close all of its 885 stores after failing to reach a deal with creditors to restructure its debt. Creditors believed they could get more of their money back by liquidating the company, rather than finding a way to keep the business going.

Issac Larian, the billionaire chief executive of toy company MGA Entertainment, offered $675 million to buy 200 locations in the U.S. and $215 million for 80 stores in Canada. Toys "R" Us rejected the offer, saying it was too low. 

The company shuttered its stores in the U.S. on June 29, 2018.

New Toys "R" Us Stores Open

Following the liquidation of Toys "R" Us, creditors took control of the company's intellectual property and formed a new company, Tru Kids Brands. The portfolio included the Toys "R" Us, the Babies "R" Us and the Geoffrey brand names. Former Toys "R" Us executives were hired to run the new company.

Toys "R" Us returned as a brick-and-mortar retailer in November 2019 after opening a smaller-format store of approximately 6,000 square feet at the Garden State Plaza mall in New Jersey. Historically, the Toys "R" Us had occupied big box locations of about 40,000 square feet. Tru Kids Brands opened a second location at the The Galleria mall in Houston.

The new Toys "R" Us is also working with former rival Target. The company's online and in-store orders are fulfilled by Target.