The Last Days of Toys `R' Us

FILE PHOTO: A Toys 'R' Us store is seen, in Hayes, Britain, December 2, 2017. REUTERS/Peter Nicholls/File Photo
FILE PHOTO: A Toys 'R' Us store is seen, in Hayes, Britain, December 2, 2017. REUTERS/Peter Nicholls/File Photo
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The Last Days of Toys `R' Us

FILE PHOTO: A Toys 'R' Us store is seen, in Hayes, Britain, December 2, 2017. REUTERS/Peter Nicholls/File Photo
FILE PHOTO: A Toys 'R' Us store is seen, in Hayes, Britain, December 2, 2017. REUTERS/Peter Nicholls/File Photo

You want a trip to Toys "R" Us, head office of Geoffrey the Giraffe, to feel like a visit to a sugarplum Toyland.

But the mood is black these days inside One Geoffrey Way in Wayne, New Jersey, spiritual home of the cartoon mascot who's been beckoning to kids for generations.

Shortly after 3 p.m. on Wednesday, Dave Brandon, chief executive officer of the iconic toy chain, delivered the news that his more than 30,000 US workers had been dreading: We're finished. After 70 years, Toys "R" Us would close shop -- a casualty of Amazon-era retailing and debt-fueled, private-equity deal-making.

"I am devastated that we have reached this point," Brandon told a group of about 600 employees. "I truly believe we did our best, under what turned out to be nearly impossible circumstances." He choked up as he spoke.

How did it come to this? The answer, as with most bankruptcies, is slowly, and then all at once. In the pre-internet dark age, the company was the unrivaled supermarket of toys, the arbiter of fads and tastes that shaped the entire industry. Its advertising jingle -- "I don't want to grow up, I'm a Toys 'R' Us kid" -- is lodged in the brains of millions.

But by last September, just months before the crucial holiday season, relentless competition from Amazon.com and Walmart -- combined with more than $5 billion in debt from a 2005 leveraged buyout -- had finally overwhelmed the chain. With little warning, it filed for bankruptcy under Chapter 11, in the hope, Brandon said at the time, of emerging better than ever.

"It's the dawn of a new day for the company," he proclaimed at the Toys "R" Us in New York's Times Square.

Instead, his hopeful plans unraveled at a startling clip. Battles quickly broke out between management and long-time creditors, who were owed about $5 billion at the time of the filing. Lenders soon were urging Brandon to shut hundreds of the 800 US stores fast to contain the damage. Before long, vendors were growing wary about shipping toys to the chain, fearing they might not get paid.

The financial powers behind Toys "R" Us -- among them KKR & Co., Bain Capital and Vornado Realty Trust -- had all but given up by then. After earning more than $470 million in fees and interest payments while taking no dividends, according to regulatory filings, they'd abandoned hopes of flipping Toys "R" Us back onto the stock market in 2013 for the ultimate payoff. The only thing to do, it seemed, was to keep cutting costs and, hopefully, negotiate easier terms on all that debt.

On one level, the announced liquidation (at least in the US) is yet another familiar story about the sorry state of old-school retailing. On another, it's a tale of how private equity has, in many cases, worsened the industry's upheavals. Sports Authority, Gymboree, Payless Shoesource, Claire's, J. Crew: All these chains, and more, have struggled to adapt to the fast-changing landscape after being taken private.

With Toys "R" Us in Chapter 11, the company declined to comment. Representatives of the owners also declined to comment or didn't respond to requests for comment.

Bondholders have seen the value of their investment plummet. The company's senior unsecured bonds due in 2018 last traded Thursday at 5.25 cents on the dollar, down from 72 cents the week before the bankruptcy filing, according to Trace bond-price data.

Almost from the start, sharp lines were drawn, according to people involved in the bankruptcy process. After the September filing, creditors -- including holders of some $3 billion in bankruptcy financing -- complained that Toys "R" Us was being less than forthcoming about its financials, as well as its turnaround strategy. Six months after the filing, the company had no bankruptcy-exit plan in place, and lenders were losing faith.

The lenders, including JPMorgan Chase and Goldman Sachs, jockeyed to provide debtor-in-possession loans, which are first in line to get repaid. Then a group of hedge funds threatened in October to trigger a default on these loans until they got a $30 million piece of them. Others argued over the valuations of various international subsidiaries and assets, such as intellectual property and the growing Asian business.

Then came Black Friday, the crucial kickoff to the US holiday shopping season. The Christmas run-up turned into a disaster for Toys "R" Us. Brandon later complained that the September bankruptcy had shaken customers' confidence. But there were other problems: The slow pace of negotiations was unnerving vendors and prompting creditors to urge more store closings.

Amid the disputes, suppliers grew increasingly anxious. Would Toys "R" Us really emerge from bankruptcy? Firms that insure vendor shipments and provide short-term financing began to back away. As of early February, most had bolted.

By then, vendors had learned what Brandon already knew: The holiday season had delivered a blow, with sales plunging about 15 percent from the previous year.

Brandon's initial optimism was fading. In a Jan. 23 letter to employees, he blamed the holiday showing on the bankruptcy, as well as some operational missteps. Formerly athletic director at the University of Michigan (he resigned amid disapproval from the Board of Regents and student anger over his profit-driven approach to the job), he'd had a successful stint at Domino's Pizza and was recruited by Bain in 2015. Now, he desperately needed another win.

But beyond picking executives, the private-equity owners generally took a hands-off approach, people familiar with the matter say. Toys "R" Us, meantime, was left to pay more than $400 million a year in interest alone on its debts.

By February, some senior-most lenders began to push for an outright liquidation. And, with that, 70 years of retail history slid toward an ignominious end.

Prospects could be buoyed by a group of toymakers who said Wednesday they're looking to make a bid for the company's Canadian business, through which they would buy some US locations in the liquidation to operate as a subsidiary. Other potential liquidation bidders have begun to crop up as well.

On Thursday, at the Toys "R" Us Express on 33rd Street in Midtown Manhattan, Angela Milligan, 28, and Chace Douglas, 25, were looking for bankruptcy bargains (no liquidation markdowns yet). Other customers waxed nostalgic.

"We grew up with it," said John Park, 39. "My kids aren't going to experience a place where there's just shelves of toys."

The Washington Post



Al-Khateeb: Saudi Arabia Plays Pivotal Role in Development of Responsible, Sustainable Global Tourism

Saudi Minister of Tourism Ahmed Al-Khateeb (Asharq Al-Awsat)
Saudi Minister of Tourism Ahmed Al-Khateeb (Asharq Al-Awsat)
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Al-Khateeb: Saudi Arabia Plays Pivotal Role in Development of Responsible, Sustainable Global Tourism

Saudi Minister of Tourism Ahmed Al-Khateeb (Asharq Al-Awsat)
Saudi Minister of Tourism Ahmed Al-Khateeb (Asharq Al-Awsat)

Saudi Minister of Tourism Ahmed Al-Khateeb emphasized that Saudi Arabia plays a central role in leading the development of responsible and sustainable global tourism.

“During our presidency of the G20 in 2020, we emphasized the establishment of the G20 Tourism Working Group, which has since created a comprehensive framework to drive flourishing, inclusive tourism that prioritizes the environment and encourages cooperation among nations and with the private sector,” he said.

In an interview with Asharq Al-Awsat, Al-Khateeb discussed the recent G20 tourism meeting in Brazil, noting a report from the World Travel and Tourism Council (WTTC), sponsored by Saudi Arabia, which highlighted the ongoing impact of COVID-19, particularly on women and young workers.

“The study, covering 185 countries, showcased creative initiatives, including those in Saudi Arabia, that address these issues and provide inspiration for G20 members and beyond,” the minister remarked.

Saudi Arabia has achieved top global rankings, marking the highest growth in international tourist numbers and tourism revenue among G20 countries in 2024 compared to 2019, outperforming other countries based on available data.

The minister affirmed that tourism is a key driver in the transformation underway in Saudi Arabia as part of Vision 2030, which has opened the Kingdom to the world.

“With our private sector partners, we will have invested $800 billion in this sector by the end of the decade, creating some of the world’s most advanced, innovative cities, resorts, and cultural sites. These developments embrace sustainability, aiding Saudi Arabia in its goal of achieving net-zero emissions by 2060,” he added.

He highlighted significant investments in infrastructure, including new and renovated airports, along with hosting major global sports and entertainment events.

“Our focus on tourism is driving notable economic, social, and cultural change. By the end of 2023, the tourism sector employed 925,500 people, a 62% increase compared to the end of 2019. Our investments in tourism destinations across the Kingdom are creating opportunities for both large and small communities,” he said.

Al-Khateeb stressed that tourism is a vital sector for the evolving Saudi economy, with preliminary estimates of its direct contribution to the Kingdom’s GDP at 4.4% in 2023, up from 3.6% in 2019. “Our goal is to reach 10% by 2030,” he said. “In 2023, we met our initial target of welcoming 100 million tourists to Saudi Arabia, seven years ahead of the 2030 goal, and we have now set a new target of 150 million tourists by the end of the decade.”

He noted that Saudi Arabia ranked 12th globally in 2023 in terms of international tourism revenue, rising 15 places since 2019, with tourists spending SAR141 billion ($38 billion).

Tourists benefit from investments in infrastructure and connectivity that make travel within Saudi Arabia easier and faster. The electronic visa program now covers 66 countries, facilitating smoother travel to the Kingdom.

“Saudi Arabia is at the forefront of integrating artificial intelligence in the tourism sector,” he continued. “In addition to designing customized experiences for tourists, Saudi Arabia recently hosted the Global AI Summit, a gathering of AI experts, policymakers, and influencers from around the world.”

The Minister reiterated Saudi Arabia’s commitment to ensuring a rewarding experience for pilgrims, with over SAR5.9 billion ($1.3 billion) invested in improving infrastructure at holy sites.

“We have introduced new tourist visa regulations and a smart Hajj identity, providing pilgrims with accessible information,” he added.

On Saudi Arabia’s role in transforming tourism into a driving force for inclusive development, Al-Khateeb said: “Tourism in Saudi Arabia is bringing about significant societal changes, creating opportunities, especially in empowering women and youth.”

By the end of 2023, women’s participation in the tourism sector reached 46%, with more than 925,000 employees, he underlined. The Ministry of Tourism has also launched initiatives investing over SAR375 million ($100 million) in human capital, in collaboration with top international colleges and schools to enhance the skills of Saudi trainees in the tourism sector.

He emphasized Saudi Arabia’s vision of tourism as a primary force for social change globally, promoting “greater tolerance, acceptance, and collaboration among the world’s peoples.”

Al-Khateeb anticipates significant growth in the travel and tourism sector over the next decade, with an estimated value of $16 trillion, accounting for 11.4% of the global economy, according to the WTTC.

He concluded by stating that Saudi Arabia is a global leader in achieving these goals, fostering partnerships between the public sector and governments worldwide, and encouraging knowledge sharing and innovation.

“We are proud of our pioneering work with various international organizations, including the G20, the United Nations World Tourism Organization, and the World Economic Forum, and we are committed to building a bright and lasting legacy for global tourism,” the minister stated.