Toys ‘R’ Us, Inc. has been a private company thanks to a 2005 leveraged buyout by KKR & Co. LP (KKR), Bain Capital, and Vornado Realty Trust. Prior to the buyout, Toys 'R' Us had been a public company with shares of stock trading on exchanges from 1978 to 2005.
The decade after the buyout saw the toy retailer struggle to hang on to its market share, which eroded in the face of stiff competition from discount retailers, Target and Walmart, along with online retailer, Amazon. Eventually, Toys 'R' Us crumbled, declaring bankruptcy, liquidating its stock, and closing all U.S. stores in 2018.
In 2019, hope emerged for the company as it announced the opening of two new stores—one in Paramus, New Jersey and the other in Houston, Texas—in time for the holiday season. With plans to open 20 more stores in the coming year, the company is betting that fans of its iconic brand will flock to its reimagined take on what the toy store of the future should be.
- From 1978 to 2005, Toys 'R' Us was a public company with shares of stock trading on the exchanges.
- In 2005, Toys 'R' Us went through a leveraged buyout, turning it into a private company that no longer offered shares of stock.
- After intense competition from discount and online retailers (such as Walmart, Target, and Amazon), Toys 'R' Us filed for bankruptcy and closed its U.S. stores in 2018.
- In 2019, parent company Tru Kids opened two new Toys 'R' Us stores, which focus on a more interactive customer experience that encourages children to test out and play with toys in the store.
Leveraged Buyout in 2005
Toys 'R' Us went public in 1978, and was a publicly traded company for about a quarter of a century. It held a death grip on the coveted toy market until its market share began eroding due to competition from companies like Walmart (WMT) and Target (TGT).
Back in 2005, the trio mentioned above won a bidding war with other private equity firms such as Cerberus Capital. KKR & Co. LP, Bain Capital, and Vornado Realty Trust combined for a $6.6 billion leveraged buyout or an acquisition of a company using a significant amount of debt. Shares were bought for $26.74 each, marking a multi-year high at the time. Shares were bought for much lower than their all-time high near $45 back in 1993.
Geoffrey's Last Stand in 2015
In 2015, Toys ‘R’ Us hired David Brandon to be its new chief executive officer (CEO). Brandon came to the large toy retailer after a stint as the athletic director of the University of Michigan. Brandon has a history of taking companies public, and many believed the hire was a sign of a future initial public offering (it wasn't). Brandon spent more than 11 years at Domino’s Pizza, a company he successfully took public. Brandon also took Valassis Communications public before he worked for Domino’s. The company also began a rebranding effort centered around their mascot Geoffrey the Giraffe, redesigning him to be more "kid friendly."
At its peak, Toys ‘R’ Us was the leading toy retailer in the U.S. Competition from big-box retailers such as Walmart and Target continued to cut into its market share, and the presence of online shopping from the likes of Amazon (AMZN) significantly hurt the toy store's sales.
The other big negative for Toys ‘R’ Us was its high level of debt. The leveraged buyout left the toy retailer with a significant amount of debt. Most obligations were pushed to 2017, and rumors of restructuring and bankruptcy began to fly.
The company then hired a restructuring law firm and soon after filed for bankruptcy. The company reported a net loss of $950 million for the calendar year 2017 up to Oct. 28, 2017, and then announced a wave of closings.
Bankruptcy in 2018
On Feb. 7, 2018, the toy store started liquidation sales at 144 stores in the U.S. after filing for Chapter 11 bankruptcy in Sept. 2017. That filing was accepted a day before the company made the decision to close around 20% of its stores.
On March 9, 2018, it was reported that the company was preparing for liquidation of all of its U.S. stores due to its failure to find a buyer or reach restructuring deals with lenders. Toys 'R' Us announced in March 2018 that the company would close or sell all stores. On April 13, 2018, Issac Larian, the billionaire CEO of the toy company MGA, made an offer of $890 million to save Toys 'R' Us. The company rejected the offer and the final 200 stores closed by June 29, 2018.
New Toys 'R' Us Stores Open in 2019
Toys 'R' Us returned as a brick-and-mortar retailer in Nov. 2019 after opening a smaller-format store of approximately 6,000 square feet at the Garden State Plaza mall in New Jersey. The toy retailer has a new parent company, Tru Kids, which is run by president and CEO Richard Barry, a former Toys 'R' Us executive.
Barry said the new stores will not be like the previous Toys 'R' Us locations. Unlike the previous "warehouse" feel that the old stores had, the new stores will be smaller, more intimate, and interactive. Customers are encouraged to test out and play with toys while in the store. There are play areas for the kids and an area for special events and children's birthday parties. The stores will showcase top brands. Lego, Nerf, Nintendo, and Paw Patrol will have separate boutiques within each store stocked with their most popular toys.
As evidence of how much the company has changed its marketing strategy, Toys 'R' Us is now partnering with former rival Target. The Toys 'R' Us relaunched website links directly to Target's site where customers can place their online toy orders.