Commentary

Toys 'R' Us Will Shutter 180 Stores In The U.S., Costing 4,500 Jobs

As part of the “reimagination” of its business with the customer in mind and the “reinvention” of its brands, Toys “R” Us is closing 180 stores — one fifth of its current number — across the country from early February through April. It will also co-brand a number of other locations as combined Toys “R” Us/Babies “R” Us stores.

“The actions we are taking give us the best chance to emerge from our bankruptcy proceedings as a more viable and competitive company that will provide the level of service and experience you should expect from a market leader,” chairman and CEO David A Brandon declares in a letter to customers posted to its website. 

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About 4,500 workers will either lose their jobs or be relocated to other stores.

“Just four months ago and before the holiday shopping season, Toys ‘R’ Us filed for bankruptcy protection as its sales were waning and debt was piling up. The toy chain faces increased competition from the likes of Amazon, Walmart and Target, and it’s struggled meeting consumers’ needs online,” CNBC’s Lauren Thomas reminds us.

“Toys R Us has said it’s focused on improving the in-store and online shopping experience and is also planning to revamp its loyalty program to appeal to more consumers,” Thomas continues.

“The decision to close stores in the United States represents a shift by the failed toy chain. When Toys ‘R’ Us filed for bankruptcy, it initially kept all of its stores open and hired more workers ahead of the holidays,” writes Michael Corkery for the New York Times. “But all along, many lawyers and creditors involved in the case had expected that the company would eventually seek to close stores to cut costs, soon after Christmas.”

And the Wayne, N.J.-based company’s “woes only seemed to magnify in recent months: The retail industry enjoyed its best holiday season in years, but Toys ‘R’ Us struggled to find its footing,” points out the Washington Post’s Abha Bhattarai.

“Target, Walmart, Amazon — they’ve smelled weakness for some time, so they’ve stepped it up in their toy selection,” Kelly O’Keefe, a professor of brand management at Virginia Commonwealth University, tells Bhattarai. “There’s no question that they’re going to benefit from Toys ‘R’ Us’s failure. I mean, think about it: Why would anyone go to Toys ‘R' Us, when they can go to Target and Walmart and buy toys at the same time they buy pantyhose and celery?”

Writing for The Atlantic, Derek Thompson observes that Toys “R” Us’s “story is a complicated one that touches on family economics, modern leisure and private-equity mismanagement.” 

About that first point: “As my colleague Rebecca Rosen wrote last year, most households don’t have a stay-at-home parent anymore, which makes shopping excursions a luxury many families cannot afford. So more moms and dads are skipping the car trips and buying toys from a website they can trust.” Thompson also makes the point that “with Millennials watching far less cable television than they used to, young parents and their children simply aren’t seeing the commercials that toy makers rely on to market new products.”

And you can blame the kids themselves, who “have been shaped by smartphones, social-media apps, and living-room bingeing,” as the psychologist Jean Twenge wrote in The Atlantic last year.” 

More bluntly: “‘Toys R Us failed because it’s a poor retailer, operating terrible stores, and was rarely the lowest on price,’ Neil Saunders, managing director of GlobalData Retail, said on Twitter,” reports Fortune’s Phil Wahba.

Yesterday’s news apparently could have been worse.

“'Earlier this month, the Wall Street Journal reported the company had hired teams of liquidators and was considering shutting about 200 stores. The company operates about 1,600 stores around the world, with about 800 in the U.S.,” the WSJ’s Paul Ziobro writes.

“CEO David Brandon disclosed plans to close the stores during a staff meeting Tuesday, when he also told employees the retailer had a disappointing holiday season. The company declined to provide details about the latest results,” Ziobro continues.

“Needless to say we would not be taking these actions if we were pleased with our holiday results,” a spokeswoman tells him — “adding that the bankruptcy proceedings hurt performance.”

And may have widened repercussions, too.

“The company's struggles have rippled outward, hurting its suppliers. Rumors continue to swirl around the possibility of a merger between Mattel Inc. and Hasbro Inc., the nation's largest toy makers. [Jefferies analyst Stephanie] Wissink estimated that Toys ‘R’ Us accounts for about 11% of Mattel's annual sales and about 9% of Hasbro’s,” reports Samantha Masunaga for the Los Angeles Times.

“Trouble in Toyland” sure ain’t what it used to be.

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