Private-Equity Debt Drives Toys R Us to Liquidate

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Smaller toy companies will likely feel the effects greater than the larger ones.

Q: Will the "Toys R Us" name cease to exist?

But Suzanne Mulvee, director of research for CoStar, a real estate research firm, says that 51 percent, or 450 Toys R Us's stores are in shopping centers considered low-quality.

The stores won't be closing right away, but when they will shut their doors is unclear, so those with registries at Babies R Us are encouraged to open a registry at another store like Target, Walmart or Buy Buy Baby.

In January, Toys R Us announced it would close 182 of its USA stores - including Babies R Us - after a disastrous holiday season.

The demise of Toys R Us will have a ripple effect on everything from toy makers to consumers to landlords.

"We know that customers are willing to pay more for an enjoyable experience - just look at the lines at Starbucks every day - but Toys R Us has failed to give us anything special or unique", said Kelly O'Keefe, a professor of brand management at Virginia Commonwealth University.

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Jim Silver, a New York-based long-time toy industry expert, said Toys R Us's CEO David Brandon told employees the company's plan is to liquidate all of its USA stores and after that, it could do a deal with its Canadian operation to run some of the USA stores.

Customers should also be aware that they have only 30 days to use gift cards at the stores, according to a report from USA Today. The company said it has more than 100,000 creditors, the largest of which are Bank of NY (owed $208 million), Mattel ($136 million) and Hasbro ($59 million).

The company now operates a Toys R Us on Boston Road in Springfield and a Babies R Us at The Holyoke Mall which is in the process of closing. The company is already closing its businesses in the United Kingdom. Children sang along with commercials about "the biggest toy store there is".

"Consumers like going to free-standing toy stores", Silver said. And Sharper Image, which also shut its stores, now sells gadgets online and opened a NY pop-up shop during the holidays a year ago. Even Party City is building up its toy offerings.

Toys R Us then launched a turnaround plan that ended with the chain seeking buyers. In the 1990s, it was the biggest toy seller in the USA, expanding rapidly as it pushed out smaller chains.

The retail landscape was shifting underneath Toys R Us' feet, and the combination of increased competition and lack of maneuverability helped lead to its current situation.

Q: When will stores actually begin to close? It added demonstrators for the holiday season to show people how toys work, and began opening Play Labs at 42 stores, areas where children can play with different items.

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