Toys ‘R’ Us, Once a Big Seller of Discs and Games, Winds Down Operations

Toys ‘R’ Us is winding down operations, even as a last-minute attempt to save the struggling toy chain – once a significant player in the DVD/Blu-ray Disc and video game sellthrough market – is gaining a fair amount of press attention.

The Wall Street Journal on April 13 reported that billionaire toy maker Isaac Larian, founder of Bratz dolls maker MGA Entertainment Inc., said he had submitted a bid of $890 million for U.S. and Canadian Toys ‘R’ Us stores.
The offer came after a public crowdfunding campaign to salvage parts of the distressed chain “failed to gain much traction,” the Journal said, noting that Larian has also “dismissed suggestions that the bid was a publicity stunt.”

Meanwhile, Toys ‘R’ Us has employed “sign twirlers” to stand at high-traffic intersections near some of its stores, promoting the liquidation at prices up to 30% off.

At an Oceanside, California, Toys ‘R’ Us – one of the older stores, with side-by-side entrance and exit doors and a metal divider separating those coming in from those coming out – the toy shelves were surprisingly full Monday night.

But the movie and video game department – set off in a corner, store-within-a-store style – the cupboards were nearly bare.

The video game section, in particular, was virtually depleted, with catalog games for the big three consoles priced at 15% off the list price.

Discs are even more deeply discounted, at 20% off. But the selection was a shadow of what it used to be, and the rack was about half empty.

Still awaiting purchase: a plethora of budget cartoons and family movies as well as a smattering of marquee titles, including Walt Disney combo packs of Snow White and the Seven Dwarfs and the live-action Beauty and the Beast, each stickered at $29.99: Universal Pictures’ The Fate of the Furious (pre-discount sticker price $19.99); and Warner’s Justice League (also $19.99, even before the discount $5 less than what Amazon is charging).

Larian launched a $1 billion crowdfunding plan last month to save at least a portion of the retail chain. So far the effort has raised $59,000, on top of the $200 million he said he already raised toward the goal from himself and traditional investors. He had set a deadline of May 28 to raise the funds for the bid.

Toys ‘R’ Us was founded by Charles Lazarus in 1957, nine years after he launched a children’s furniture store, to which he gradually added more and more toys. Toys ‘R’ Us subsequently expanded into a chain and ultimately operated around 800 stores in the United States and roughly the same number abroad.

The chain was so successful that it birthed sister chains Babies ‘R’ Us and Kids ‘R’ Us. In 2001, Toys ‘R’ Us opened a 110,000-square-foot flagship store in New York’s Times Square at a cost of $35 million.

But with the rise of discount chains like Walmart and Target Stores, with their sizeable toy departments, toy specialists found it increasingly hard to compete. The rise of the Internet and the surge in e-commerce made things even more difficult. K·B Toys and FAO Schwarz were among the casualties (although Toys ‘R’ Us picked up both chains’ remains), while Toys ‘R’ Us limped along, closing stores and negotiating with toy makers for better deals.

A $7.5 billion leveraged buyout in 2005 by Bain Capital, KKR & Co. and Vornado Realty Trust loaded Toys ‘R’ Us with debt, weakening the chain’s position even further.

After years of trying to find a buyer, the company filed for Chapter 11 bankruptcy protection in the United States on Sept. 18, 2017, and has also filed for bankruptcy protection in Canada.

On March 14, 2018, Toys ‘R’ Us announced that all of its stores in the United Kingdom would close. The next day, it was announced that the U.S. operations of Toys ‘R’ are us were going out of business as well and all 735 of its remaining U.S. locations would be shuttered.

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