All Signs Point to a Toys R Us Comeback
Back in March, before a single store had been fully liquidated, we ran an article on Dealerscope that hinted a Toys R Us “comeback” was all but a foregone conclusion. At a time when brands like hhgregg and Circuit City are both attempting to make their own comebacks of sorts, we felt it was safe to assume that the Toys R Us brand, in some way, shape, or form, would rise from the ashes once the bankruptcy proceedings and liquidation process were complete.
However, I don’t think anyone could’ve predicted how quickly the plan would be set in motion to bring the toy retailer back from nonexistence.
According to a Wall Street Journal report, a group of hedge funds that are in line to take control of the company—the same group that helped pull the plug on the proposed reorganization earlier this year—intend to revive the business under the same Toys R Us and Babies R Us brand names. The newly proposed reorganization plan, which was detailed in court filings on Monday, suggest the formation of a new holding company for the two brands that “maintains existing global license agreements and can invest in and create new, domestic, retail operating businesses” under the brand name.
In those same filings, the retailer said that it received a number of qualified bids for various assets, including the Toys R Us and Babies R Us brand names, registry lists, website domains, Geoffrey the Giraffe, and more, but opted to forgo a highly-anticipated bankruptcy auction. They said, in the filing, that those qualified bids and potential return on a bankruptcy auction would not likely “yield a superior alternative” to their plan to revive the brand.
According to the WSJ report, the pivot in the restructuring plan comes after the company consulted with the controlling parties—a group of lenders that includes Solus Alternative Asset Management and other hedge funds—which were behind the decision to close up shop. That group of lenders has denied playing any role in the liquidation of Toys R Us, though they reportedly did consider the iconic retailer was “worth more dead than alive,” according to a report earlier this year.
A lot has to be sorted through before any potential relaunch of the Toys R Us and Babies R Us stores can happen—including settling existing complaints filed on behalf of the 33,000 former employees seeking severance pay. But it does appear that the groundwork is being laid for the toy retailer to return.
Though perhaps the less-cost-effective route of forcing a shift in strategy, this gives the retailer an opportunity to reconsider how it does business in the age of the internet and omnichannel retailing. At the same time, the toy industry will undoubtedly welcome the retailer’s return with wide open arms. According to the WSJ, the store’s closing left an $11 billion hole in the toy industry as vendors were left without the only major brick-and-mortar platform for their industry.
At the very least, I’ll be excited to see Geoffrey return from his very brief retirement.