Media rumors say that Toys “R” Us may liquidate its American stores after a Chapter 11 filing did not give management the tools to turn the company around. The failure once again shows that the nation’s oldest retailers, from Sears to J.C. Penney, cannot defend themselves from the ravages of e-commerce and the effects of debt.
Toys “R” Us was founded by Charles Lazarus in 1948. The toy business was large enough that he was able to compete with department stores that had toy sections. A standalone chain of stores offered children and their parents a chance to wander aisles of toys uninterrupted by other merchandise. Over time, however, the limited inventory made Toys “R” Us a one-stop shop that was not a destination for other products. As competition increased as department store toy sections grew and with the coming of e-commerce companies led by Amazon, Toys “R” Us ran out of time. Looking back, it probably should have expanded the list of products it sold.
Some who followed the fortunes of the retailer said its demise was based on a 2005 leveraged buyout for $7.5 billion. However, if the retailer had been successful enough, the debt burden may not have mattered.
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The Toys “R” Us collapse shows how little iconic retail brands matter anymore. The stock prices of J.C. Penney, Sears and other retailers that have been at the center of American retail, sometimes for over a century, have been cast aside by customers who show that often brand does not matter.
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