Toys "R" Us - 50% scraps are all that's left

[feed]

This has more to do with the PE deal than anything else.  Market changes and the war with Amazon/Walmart haven’t helped.   But it’s the debt (restructuring) that’s brought them to chapter 11, well that and the fact that the trade insurers increased the price of insuring payment for deliveries.

But companies can come back from chapter 11, this isn’t liquidation, at least not yet.

 

edit to add:  Expect to see more of this, companies with high net debt are going to be looking for ways to restructure that debt as servicing it is going to become increasingly difficult over the next 2 to 3 years.   
 

Edited September 19, 2017 by feed

[lazuli16]

They officially filed.  My money was on Kmart to go first.  Time to use up my gift cards.

https://www.usatoday.com/story/money/2017/09/19/toys-r-us-files-bankruptcy/678069001/

[pcaster]

https://www.toysrusinc.com/uploads/tinymce/uploaded/Project Sunrise/Customer FAQ.pdf

#4 - "We expect to continue honoring return policies, warranties and gift cards. Customers should expect our loyalty programs, including Rewards“R”Us, the Toys”R”Us Wish List, Geoffrey’s Birthday Club and the Babies“R”Us Registry in the U.S., to continue as normal in their current forms. International customer programs will continue as usual as well."

[minicoopers11]

11 hours ago, Jackson said:

Anyone ever figure out how an eBay seller in China can sell something for $0.99 (with free shipping to the United States) and make a profit? The cheapest I could ship the same item across town is $2.61.

Shipping rates aren't equitable. We pay a minimum of what...$8 for a small padded envelope to China? They pay much less than that.

[minicoopers11]

1 hour ago, Average Guy said:

Maybe it's because I'm in panic mode but I  saw nothing mentioning get they would honor gift cards. Why would they? It's a debt. 

FAQ said "We expect to..." Nothing about WILL honor gift cards.  Think I'll buy some stuff now just in case they change their minds.

[KvHulk]

I expect a lot of things that don't come to fruition.

[zskid00]

Nevermind what I just posted.  I guess the court gets to decide if they will continue accepting gift cards and for how long.  With the huge dollar amount that is on the marketplace they would probably not void them right away which would screw a large amount of American consumers.  They will probably allow them to be used through the end of the year, if not indefinitely until they figure out what future operations will look like.

https://www.giftcards.com/gcgf/giftcard-chapter11-watchlist

Edited September 19, 2017 by zskid00

[Alpinemaps]

Kids are throwing away physical toys for digital playground. Trend is changing, I'm doubtful that there will be another player in game with same offering. Kids are spending majority of the time playing games on pc, consoles, mobile phones. And the entry level for this entertainment is getting lower and lower. Even 3-4 year old kids are demanding own phone or console.

Do you have kids Shewie? Or is this your general idea?

I have a 5 and 9 year old. Yes, having a tablet is always a "want". But spending the majority of time on it? Nope.

LEGO is still a top desire around here. But so are art supplies and sports equipment. And drones. And in talking to the other parents in my neighborhood and at the kid's school, it's the same for them.

Sports starts at a young age around here. Maybe it's living in SoCal. But my son's ice hockey team is made up of 3,4, 5 and 6 year olds. His t-ball team was the same.

Kids have such easy access to digital, that's it's not the big deal it was when we were kids.

[Val-E]

Project Sunrise? Sounds like a military operation and inspires very little confidence. I´d use the vouchers ASAP. If the returns policy is still respected in 60 days you can always decide to take them back.

[zskid00]

My son is 5 and he plays with Disney Cars all day long.  Sure he uses a tablet in Kindergarten and occasionally we break out the Wii at home, but his screen time is pretty limited.

[Val-E]

1 minute ago, Alpinemaps said:

 

Sports starts at a young age around here. Maybe it's living in SoCal. But my son's ice hockey team is made up of 3,4, 5 and 6 year olds. His t-ball team was the same.

 

Ice hockey in California?

[zskid00]

Just now, Val-E said:

Ice hockey in California?

Hell froze over?

 

 

 

Just kidding.  My brother lives near San Diego and I love visiting.

[kris_1973]

My son is 5 and he plays with Disney Cars all day long.  Sure he uses a tablet in Kindergarten and occasionally we break out the Wii at home, but his screen time is pretty limited.

Very similar to a friend of ours. Her 6yo son mostly plays with physical toys (like Lego) and must 'earn' tech time (15min increments for tv/tablet) by doing chores/homework/reading/etc)... and this seems to work out very well for them.

[jeff_14]

33 minutes ago, Val-E said:

Ice hockey in California?

We Canucks have been taking over. We're where the Chicago mob was in the 1930s out there. 

[Val-E]

1 minute ago, jeff_14 said:

We Canucks have been taking over. We're where the Chicago mob was in the 1930s out there. 

No wonder TRU are screwed if they are having to anticipate selling Ice Hockey stuff in Cali and outdoor swimming pools in Canada!

[flynnibus]

6 hours ago, tacsniper said:

I can't wait for the massive clearance coming up  

If TRU does close, another will come and take its spot. There will always be a need for a brick and motor toy store. Majority of the sales are definitely from impulse buy.

Where is the Toy Store at the Mall?

Heck, notice the Mall is leaving too?

Toys may be covered by a few isles in Target and Walmart..  

[jeff_14]

Just now, Val-E said:

No wonder TRU are screwed if they are having to anticipate selling Ice Hockey stuff in Cali and outdoor swimming pools in Canada!

Those things would actually help them. Ice hockey has really taken off in Cali and swimming pools have always been popular in Canada. We do have summers here. What we don't do here is leveraged buyouts for no purpose that add $7 billion in debt at a time when Amazon is using debt to expand their business rather than the pockets of lawyers and consultants. 

[flynnibus]

2 hours ago, Average Guy said:

Maybe it's because I'm in panic mode but I  saw nothing mentioning get they would honor gift cards. Why would they? It's a debt. 

FWIW - bankruptcy doesn't mean 'all debt disappears' - Chapter 11 is restructuring... basically they get to halt collections against them so a recovery program can be hammered out.  Obligations may be reworked, but it's not automatically 'all obligations disappear'.  At least at this point, pissing off the customers probably isn't in the best interest for 'road to recovery'

[Val-E]

A question for US members with specialist knowledge. If you wanted to buy TRU, would you do it now and maybe negotiate a debt haircut in exchange for carrying on with business or wait till it shut down completely and just acquire the assets?

Edited September 19, 2017 by Val-E

[flynnibus]

3 minutes ago, Val-E said:

A question for US members with specialist knowledge. If you wanted to buy TRU, would you do it now and maybe negotiate a debt haircut in exchange for carrying on with business or wait till it shut down completely and just acquire the assets?

depends if you want to continue 'as is' or if you are trying to start over as something new.  The damage done to a brand through Bankruptcy Chapter 7 is very hard to undo in the eyes of customers.  The problem with TRU is apparently this round isn't even the worst of the upcoming debt.  2019 is even worse.  It boils down to if you can get the debtors to agree to a debt exchange that makes sense vs what you are willing to pay for the assets.  It is "You are owed 100.. but you'll never see that... so  I'll offer you 30 and you can cut your losses" - but if the debtor thinks they can get more in liquidation, they will hold out for more money.

If you are buying a brand and want to continue operations, you want to pay the least without imploding the company in front of your future customers... which normally means a debt for equity exchange plus some payout.

But big retail is one of the worst outlook areas in the sector now... unless you have some new genius idea in retail, not sure who wants to take on billions in debt, to spend another billion or so modernizing a retail chain... in a hope to make money in the future in a segment that is being brow beat by competition with a completely different cost structure that you can't come anywhere near touching.

[Val-E]

Time for a "Will you miss TRU if it closes?" poll?

[TheBrickClique]

So how long until we see some crazy discounts on resold gift cards for those willing to take a chance?  When radio shack went down, they were practically giving them away. 

As a GC seller, you would want to get rid of them ASAP while they are still usable. As a buyer, you can wait until you are in the checkout lane to buy them. So, I see this as a win for us.

They don't even have to actually become invalid.  Just the possibility. 

"Mortimer!  We're back!"

[exciter1]

Now Lego is being mentioned in the same breath.
https://www.washingtonpost.com/news/retropolis/wp/2017/09/15/legos-plastic-bricks-transformed-childhood-are-they-sturdy-enough-to-survive-screens/

[jeff_14]

28 minutes ago, flynnibus said:

depends if you want to continue 'as is' or if you are trying to start over as something new.  The damage done to a brand through Bankruptcy Chapter 7 is very hard to undo in the eyes of customers.  The problem with TRU is apparently this round isn't even the worst of the upcoming debt.  2019 is even worse.  It boils down to if you can get the debtors to agree to a debt exchange that makes sense vs what you are willing to pay for the assets.  It is "You are owed 100.. but you'll never see that... so  I'll offer you 30 and you can cut your losses" - but if the debtor thinks they can get more in liquidation, they will hold out for more money.

If you are buying a brand and want to continue operations, you want to pay the least without imploding the company in front of your future customers... which normally means a debt for equity exchange plus some payout.

But big retail is one of the worst outlook areas in the sector now... unless you have some new genius idea in retail, not sure who wants to take on billions in debt, to spend another billion or so modernizing a retail chain... in a hope to make money in the future in a segment that is being brow beat by competition with a completely different cost structure that you can't come anywhere near touching.

Another issue that has come into play lately for a lot of retail operations is the land value. I don't know if TRU owns many of its locations since most seem to be in malls, but there have been many cases where bankrupt companies were basically sold at a price equal to the value of the land they own. Up here in Canada, Bell telephone bought out Computer City just to obtain an instant network of retail locations for its new store rollout. They dumped all the other assets as they didn't want to be in that business.

[Val-E]

3 minutes ago, exciter1 said:

Now Lego is being mentioned in the same breath.
https://www.washingtonpost.com/news/retropolis/wp/2017/09/15/legos-plastic-bricks-transformed-childhood-are-they-sturdy-enough-to-survive-screens/

Does the title have anything to do with the content of the article? I am still waiting for them to give facts why Lego is in deep trouble. The MF is a bad example.