Former CEO wants to bring Toys ‘R’ Us back from the dead

Discussion
Photo: Getty Images
Jun 27, 2018
George Anderson

Earlier this week, it was reported that the last remaining Toys “R” Us (TRU) stores in the U.S. will close by Friday. That news, however, has apparently not ended the belief that the chain, which fell under the weight of $5 billion in debt, can be resurrected in some form and return as a force in the toy business.

Former TRU CEO Jerry Storch has been working with other investors including Fairfax Financial Holdings, which acquired the toy retailer’s Canadian operations, to put together a deal to keep the business operating, according to Bloomberg.

The odds of pulling off such a deal appear difficult at best. Mr. Storch’s group would first have to secure the rights to TRU’s intellectual property when it is auctioned off in about a month’s time. Acquiring the chain’s former stores, if that is part of the plan, would be handled separately.

Even if the group put together by Mr. Storch proved successful on the intellectual property and real estate fronts, the matter of putting together an organization and acquiring merchandise in time for Christmas, the most important selling season for toy retailers, seems a reach.

Many believe that TRU’s fate was sealed when the chain was acquired in a $6.6 billion leveraged buyout in 2005 by Vornado Realty Trust, Bain Capital and KKR & Co. The need to pay down debt stripped the chain from the capital it needed to establish its stores as toy shopping destinations. It also kept the company from making the investments needed to link its online and store operations in the face of intense competition from Amazon.com, Target, Walmart and others.

If anyone is to bring TRU back, Mr. Storch appears to be as good a candidate as there is. As Bloomberg reports, he was installed as CEO after the chain was taken private. During his time at TRU, the chain managed at one point to post earnings before interest, taxes, depreciation and amortization (EBITDA) of $1 billion. TRU was unable to match that earning performance following his departure.

Mr. Storch’s plan, Bloomberg reports, involves several hundred stores that would combine toys and baby brands. As CEO of TRU, Mr. Storch began testing a similar concept, and there were still 200 “hybrid” stores operating when the chain began to shutter its locations.

DISCUSSION QUESTIONS: Do you think Toys “R” Us could be viable once again? What will it take for Larry Storch or someone else to make that happen? What would a successful TRU look like?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I think it's quite possible. Toys remain a (relatively) low-margin business, but toy and baby stores are good destinations."
"Oh let it die already. The business has effectively been conceded to Amazon and Walmart long ago."
"The thing is, there currently isn’t a premier surviving category killer in toys."

Join the Discussion!

26 Comments on "Former CEO wants to bring Toys ‘R’ Us back from the dead"


Sort by:   newest | oldest | most voted
Mark Ryski
BrainTrust

I think the deck is stacked against this happening, but I’m still cheering from the sidelines. As noted, there are lots of things that need to happen in order for this to have a chance at success. But notwithstanding the bad odds, I believe there are many stakeholders that would like to see Toys “R” Us come back to life — employees, suppliers, etc. Storch has one key element that others don’t — he’s actually successfully run Toys “R” Us. If Storch is able to cobble something together, I would expect it to be a much smaller, leaner version of what Toys “R” Us once was.

Dick Seesel
BrainTrust

Toys “R” Us was partly the victim of private-equity debt burdens, but also made its own mistakes. This is an example of a big box store with too much square footage — in a seasonal business facing robust competition from discounters and Amazon — failing to adapt.

There is probably enough brand equity remaining to salvage the business, provided that Storch and team rethink the model. (And get rid of that debt load.) Maybe an online-only play is the place to start, instead of trying to recapture the past.

Art Suriano
BrainTrust

I commend Larry Storch for the attempt, and it would be nice to see the brand return and prosper under new leadership, but I’m not sure how feasible that is. In fact, I wonder if it would not be best for Mr. Storch to start a new toy store chain under a new name. These efforts have happened before most recently with those attempting to resurrect Circuit City. Unfortunately, it hasn’t happened because there is too much time and money spent on purchasing intellectual property and renegotiating with landlords and vendors when others have already walked away.

Starting fresh would be best. Everyone knows the Toys “R” Us name but starting a new chain that is the toy store of the future, with excitement and reasons for customers with their kids to visit the stores, could work with almost any name supported by the right marketing.

Bob Amster
BrainTrust

Toys “R” Us could be a viable business once again — if it is run well. We have seen that almost any business can be viable if it is run right. Leveraging a once-leading business with high debt works against its future. What does the new ownership have in mind? To be successful, the new Toys “R” Us would have to adopt a solid omnichannel model in which the stores and e-commerce operate in concert. Gaining the confidence of the suppliers will be of great importance to insure that there is a steady flow of product, new and basic. Recruiting the merchandising savvy to resurrect the business will be key.

Paula Rosenblum
BrainTrust

I think it’s quite possible. Toys remain a (relatively) low-margin business, but toy and baby stores are good destinations.

I also think I said yesterday that a lot of the reported problems with Toys “R” Us could be said about most any retailer in the aughts, but that the debt burden (and the unmentionable — fees associated with that debt) was the absolute killer.

Max Goldberg
Guest

At this point, the Toys “R” Us ship has sailed; a victim of the times, competition and private equity greed. A successful Toys “R” Us would have to find a niche that Amazon, Walmart and Target do not cover. It would need to provide an experience that becomes a consumer magnet. And it would need to have the buying clout to command unique products from manufacturers.

Phil Masiello
BrainTrust

There is still value to Toys “R” Us’s brand and IP. The battle is going to be all uphill. This brand’s problems were not because of poor operations. This was just a bad LBO by greedy VCs.

Larry Storch will need some partners with deep pockets and great negotiating skills to revive this.

But a revived brand needs to have an omnichannel presence with a strong social component. Toys “R” Us could dominate the online toy category with the correct strategy, as well as strategic brick-and-mortar support.

I hope he can pull it off.

Jeff Sward
Guest

Is the heritage of Toys “R” Us brand equity or baggage? The debt will have been managed (?). The mistakes can be learned from (right?). And a new experiential toy store can be born. I’ve adopted the mantra: Explore + Experiment = Experience. Surely a toy store can be built around this simple mantra. It seems to work for LEGO and Build A Bear. Don’t kids want to explore and experiment? I’m thinking they always have and always will.

Joan Treistman
BrainTrust

There are many examples of businesses failing after their founders leave and being resurrected by those same founders. So it’s been done before and I wish Larry Storch well. While others mention many obstacles, I’m focused on one advantage: Larry Storch started a successful retail enterprise. Starting from nothing was a big accomplishment. Understanding the current toy market and how consumers shop for toys will undoubtedly be the foundation for success. Not being stuck in how things were done before is essential.

I don’t know what a successful Toys “R” Us will look like. I’ll leave that to a visionary, Larry Storch.

Nikki Baird
BrainTrust

If he can start from a relatively clean slate, sure. Half the problem for Toys “R” Us was that it had old, awful stores (which I called toy jails for good reason) and an old, awful website, and no money to fix either.

If the plan is to take the assets, good and bad, as the starting point, I don’t think there is enough money to save Toys “R” Us. If the plan is to cherry-pick the good and find the money to start fresh, especially in digital, then I’d give them better odds.

The thing is, there currently isn’t a premier surviving category killer in toys. Electronics has Best Buy, sporting goods has Dick’s, housewares has Bed Bath & Beyond, books has Barnes & Noble. Toys should be able to support one big box chain of physical stores. It was just that Toys “R” Us’s burdens were so large, there was no overcoming them.

Harley Feldman
BrainTrust

Bringing back Toys “R” Us in a marketplace that has many online competitors, shrinking store real estate and numbers of stores and increased competition from Barnes & Noble and others is a tall order. Toys “R” Us would need to position itself as either a low-cost provider (not likely) or position itself as somewhat unique in the market. The combination of toys and baby brands might work, and Storch has a relatively successful background there. The best strategy would be to find unique toy and baby brands that Toys “R” Us would have exclusive rights to placed alongside more everyday products. He might even try a store-within-a store approach with well-known toy and baby brands.

Joy Chen
BrainTrust

Toys “R” Us can only be successful if its business model and positioning changes from what it was before. The consumer today is looking not only for products, but for personalized experiences when they shop. Toys “R” Us will also need to reevaluate its distribution channel and the way it links online with brick-and-mortar to be successful. These are big changes that will take time to implement in addition to the financial expectations.

Tom Dougherty
BrainTrust

They might resurrect the chain but it won’t survive as long as they consider brick-and-mortar as an important part of the operation.

I think the brand has some equity. But Amazon recently dined on their lunch. Much as Walmart did a few years back.

Cathy Hotka
BrainTrust

Art Suriano is right — Larry Storch would be more successful if he were to start from scratch. A new toy and baby brand, focused on experience rather than merchandise, would have a better chance of survival. Millennials are poised to enter parenthood, and a digitally-savvy brand would serve them well.

Ken Lonyai
BrainTrust

Oh let it die already. The business has effectively been conceded to Amazon and Walmart long ago and both will push back hard against any reincarnated version. Aside from the many and varied challenges that reconstituting Toys “R” Us would require, there has been massive damage to consumer perception of the brand that would take a long and expensive effort to overcome.

It feels like this is about denying reality and nostalgia, bringing new meaning to the words of Led Zeppelin, “What Is And What Should Never Be.”

Glenn Cantor
Guest
5 months 21 days ago

I hope Mr. Storch can restore Toys “R” Us in the U.S. There is something special about bringing a child to a toy store as well as physically shopping for toys as gifts. It is fun. A new Toys “R” Us will be unencumbered by the business stuff that forced the old company to declare bankruptcy. Starting again offers Mr. Storch and his investors an open book to make selling toys fun for their shoppers and for their employees, the way it should be.

Neil Saunders
BrainTrust

As much as I applaud this initiative, there are a lot of hurdles to jump over before this becomes a reality. In my view, some of these are likely too high to navigate successfully.

Just my personal opinion — but I’d rather see something new created, rather than trying to revive formats and businesses that failed!

Byron Kerr
BrainTrust

Though Larry has achieved success in the past, the landscape has dramatically changed. If they can execute a successful Bricks + Clicks model that drastically reduces the footprint of a store while building a more financially sound baseline, it could be worth exploring, but this is a challenging category.

Craig Sundstrom
Guest

It would seem more useful if Mr. Storch directed his efforts to trying to save companies that are still alive, although insofar as he seems to be restricted by his past, perhaps I should direct that remark to would-be investors.

But no, I don’t find the idea viable … any more than the previous half dozen times this question has been asked.

Carlos Arambula
BrainTrust

The space has been left empty, so it’s possible for Toys “R” Us to fill it again. However, aside from the debt burden, the brand has to redefine itself.

The toy category, purchasing behavior and “playtime” has quickly evolved while the TRU concept remained relatively stagnant. Jerry Storch needs to define the brand from the bottom up — start with a blank page, with a target-consumer centric perspective.

Carol Spieckerman
BrainTrust

The assumption that the absence of a toy or baby category killer (or any category killer for that matter) represents an obvious void in the market is spurious. Big box category killing is a perilous proposition when Amazon can take aim at any time and mercilessly attack without regard to profitability. Best Buy has done a (so far) masterful job of circumventing this reality by broadening its definition of “consumer electronics” to include smart home, connected solutions, services, etc. and by serving as a flagship location for some of the major brands it carries. That’s a far cry from TRU’s history of me too private brand creation and old school category-focused merchandising approaches.

Kenneth Leung
BrainTrust

It comes down to the financing. Toys “R” Us is still a viable and nostalgic brand, but it only lasts so long. If they can get reboot without having to finance a crushing debt load and get a few well run flagship stores with decent online going before Xmas, they may have a chance to build it back up in 2019. It is a long shot given the timeframe he has to work with.

Shep Hyken
BrainTrust

I predicted this would happen. I hope it does. (One day I’ll have grandchildren and I want them to experience Toys “R” Us!) Seriously, it makes total sense. Bring the brand back with all the good and leave what didn’t work behind. This is an opportunity for Mr. Storch to “know then what he knows now” and execute a strategy for building out a chain that can survive and thrive in today’s world of retail.

Ricardo Belmar
BrainTrust

Jerry Storch has the best chances of anyone to pull this off, but it’s definitely an uphill battle to succeed. It’s all in the execution — he’ll need to craft a completely new toy shopping experience and not just recreate the old TRU. That model wasn’t going to survive the modern era of retail, but there’s certainly room for someone to disrupt this low-margin, commoditized market led by Amazon, Walmart, and Target. As long as he focuses on the in-store experience (vs just stocking shelves) and the online digital experience, and ties it all together for the modern shopper, there may yet be hope!

Kai Clarke
BrainTrust

TRU went bankrupt for a good reason; they have an outdated model. Bringing back a retailer who has a bad model requires even more money and financial and human resources than just starting one from scratch. A successful TRU would have to have extensive lines of credit, an eCommerce first position, and slim stores which offer easy buy online, pick-up instore options.

Rich Kizer
BrainTrust

Here’s the Toys “R” Us deal from my perspective: We’ve got to get out of the “commodity” mentality and into the “experiential.” A rebirth of Toys “R” Us must involve a store concept we have not seen before in their category. It’s about the experience, the wonder, the surprise.

Like amusement parks that all seem to tout the fastest roller coasters. But everyone has roller coasters. Disney is an amusement park (by category) with roller coasters, but that’s not their draw. They are far more. They are their own experience that cannot be duplicated by another. I believe that is why people pay Disney prices and come from all over the world. With imagination along with an excited management team that envisions creating a new and unusual retail environment — one that is constantly changing — they will truly find their unique spot in crowded marketplaces. That’s what it will take. Welcome to the “retail reinvention” world.

wpDiscuz
Braintrust
"I think it's quite possible. Toys remain a (relatively) low-margin business, but toy and baby stores are good destinations."
"Oh let it die already. The business has effectively been conceded to Amazon and Walmart long ago."
"The thing is, there currently isn’t a premier surviving category killer in toys."

Take Our Instant Poll

How would you rate the prospects of a revived Toys “R” Us operating several hundred toy/baby stores in the U.S.?

View Results

Loading ... Loading ...