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Toys ‘R’ Us Shocked The World By Filing for Bankruptcy Recently

toys-r-us-declare-bankruptcy

Nov,01,2017

By:Mike Cibik

Toys ‘R’ Us Shocked The World by Filing for Bankruptcy

 

1957 was a truly different time and place for retail stores in America. During that year, Charles Lazarus opened his first Toys ‘R’ Us store in Rockville, Maryland. The store took off and eventually spawned many new stores, and over the course of years, they found themselves as one of the premiere toy retailers in the country. From the introduction of the store’s Mascot, Geoffrey the Giraffe, in 1973, it seemed like they were destined for greatness. If you grew up in the 70’s or 80’s, you wanted like nothing else to have a few hours to get lost in a Toys ‘R’ Us store.

 

Toys ‘R’ Us began to experience setbacks as early as the 1990’s, particularly when the influence of a competing chain, Wal-Mart, began to grow and eat into their profits. It provided a one-stop-shopping market that allowed people to get anything they needed – including all of the holiday season’s hot toys – in a single location. Similar brands continued to eat at Toys ‘R’ Us’ bottom line as well when Target piled on to take their corner of the market. Other, more storied, retail chains have also tried to join in on the success, such as Kmart, meeting with either lukewarm success, or in Kmart’s case, filing for bankruptcy in 2002. It was all enough to add to the woes of Toys ‘R’ Us as they pushed forward into the next century.

 

Skip ahead to the 2010’s and the cracks were already showing in many big box stores in the face of growing e-commerce juggernauts like Amazon.com. Retail giant, Borders Books and Music collapsed in 2011, and many traditionally stable companies were starting to falter. Toys ‘R’ Us managed to accrue five billion in debt as they tried and failed to keep up with the online trend, only totaling ten percent of their revenue through an online store most consumers didn’t even think about. Why would they with the arrival of Amazon Prime and the allure of free shipping (plus not having to drag their children into a chain store)?

 

And things continue to change in 2017. The toy market may be growing, but brick and mortar stores are feeling more and more pressure from the internet. Online retailers, who don’t pay as much in terms of employees, rent, or general overhead, are crushing traditional retail models in what some are calling the ‘Retail Apocalypse.’ It’s the downside of progress – the things you used to love disappear. Sometimes they come back, like vinyl records seem to have. Most things tend to go the way of the eight-track, though.

 

Toys ‘R’ Us is certainly feeling the heat – in September of 2017, the retail giant officially filed for Bankruptcy, joining the ranks of other shopping mall anchors to feel the pinch such as JC Penney’s or Macy’s. Even smaller, non-anchor stores like Payless ShoeSource or RadioShack feel it. But, Toys ‘R’ Us? The place that brought joy to three generations of kids? Most people don’t even like the thought of it.

 

The owners of the chain, a group of real estate agents and investment partners (Vornado Realty Trust, Bain Capital Partners, and Kohlberg Kravis Roberts), have made assurances via their spokesperson, Dave Brandon, that “Toys’R’Us and Babies’R’Us brands [will] live on for many generations.” The Bankruptcy filing is such that their stores will remain open and their debt will be restructured, so much like many of its retail peers, the stores will not completely go away – but it’s likely there will be fewer of them, and that new directions will be introduced from their board to regain control of their brands and their fortunes.

 

What Can the Average Consumer Learn From Toys ‘R’ Us?

 

While Toys ‘R’ Us is very different from the average person on the street, you can take a lot of lessons from the retail giant’s turn of fortunes. There’s more in common with business Bankruptcy and personal Bankruptcy than you might think, and some of it is directly applicable.

Past Performance Is Not Always Predictive of Future Results

 

For Toys ‘R’ Us, the past was a glorious time. They grew, and grew until they lost sight of what was happening around them. They earned more revenue each year, enough to open many retail locations. They brought a lot of joy to a lot of kids. They got caught up in their success. But, the past is just that. It’s what happened yesterday, not what’s going on today. The things they’d learned and had come to value as successful strategies were no longer adequate. Times changed, and they kept making the same decisions, even when some board members were trying to right the ship. It’s easy to get complacent in that situation.

 

Consumers can’t afford to make those mistakes either. In a world where wages are stagnant, and cost of living is rising, consumers look to new models of consumption that don’t cost as much. But, financial hardship happens regardless sometimes. The leading causes of bankruptcy are largely surprise events. Unexpected debts can arise such as medical debt or runaway credit card spending when the chips are down. A divorce or job loss can destroy your ability to pay your debts on time. And then there’s what happened to Toys ‘R’ Us – bad budget habits. Acting like nothing is wrong when the above happens to you is a sure way to find yourself in financial difficulties.

 

Decisive Action is Paramount

When you identify the problem, you need to act quickly. While you may not have thousands of employees and a board to satisfy, you have things that are important to you riding on your financial solvency. Spouse, children, extended family, reputation, and financial security are all on the line. Sitting around waiting isn’t going to help any of them. You are unlikely to have a team of lawyers at your beck and call like Toys ‘R’ Us, but you can take swift action by seeking the assistance of an experienced Bankruptcy Attorney.

 

Understand That Bankruptcy Isn’t the End

 

You are likely to have a lot of negative connotations to go along with the idea of Bankruptcy – but remember, bankruptcy is meant as a way out from a bad situation. It’s possible to come out on the other side with some of your assets still intact and in your possession, just as Toys ‘R’ Us will continue to have most of its brick and mortar stores. There is life after Bankruptcy. You can still acquire a new home with a little help from the FHA, and there are ways to begin to slowly improve your credit after Bankruptcy.

 

Get The Advice You Need

 

You won’t have exactly the same options as Toys ‘R’ Us, but you have two analogs to their strategies: Chapter 7 Bankruptcy and Chapter 13 Bankruptcy. Which version is right for you depends on your own unique circumstances, but Cibik & Cataldo, P.C. have thirty-five years of growing, adaptive experience with personal Bankruptcy laws that will assist you in finding the correct path forward to a brighter financial situation.

 

You can schedule a free consultation online, or call our offices directly at 215-735-1060.

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