When news broke that Toys ‘R’ Us had failed to find a buyer or reach a debt restructuring deal with lenders, the end seemed near for the the 70-year-old big box toy retailer. The inevitable was announced Wednesday when the bankrupt company told employees it would most likely close all of its 700 or so remaining U.S. stores.
The end of Toys ‘R’ Us, which accounts for 15% of U.S. toy revenue, will have far-reaching effects on the industry. Here’s who and what will be impacted the most.
The U.S. division of Toys ‘R’ Us employs some 33,000 people, all of whom will be affected by the closure. Stores will remain open for some time with liquidation sales set to begin in a few weeks.
And some employees might keep their jobs if Toys ‘R’ Us successfully sells its healthier Canadian business, plus its 200 best U.S. stores to a buyer, with the new entity run from Canada.
Mattel, the maker of Barbie, Fisher Price, and Monster High toys, have already been impacted by the Toys ‘R’ Us bankruptcy. The company has seen its global sales fall since the company filed for its bankruptcy. Toys ‘R’ Us is Mattel’s second-largest customer, accounting for between 15 and 20% of the company’s U.S. sales. And the retailer still owes Mattel more than $135 million.
The closing of Toys ‘R’ Us will now put even greater pressure on the company as it looks for places to sell its dolls and games.
The bankruptcy has pushed shares down on publicly traded companies like Hasbro and Mattel. But privately held companies have been impacted as well. The plastic bricks maker reported its first sales drop in 13 years earlier this week. Still, Lego is still better poised to handle the loss of Toys ‘R’ Us than its toy maker competitors, in part due to its success with its Lego Movie and Star Wars line of toys.
The company is a licensee of several hundred trademarks including Disney, Star Wars, and Nintendo. The company also makes kids furniture, construction and outdoor toys, dress-up and role play types of toys, as well as action figures.
The toymaker is behind such iconic brands such as My Little Pony, Play-Doh, board games like Monopoly, Yahtzee, Cranium, and Candy Land, as well as GI Joe action figures.
Jefferies analyst Stephanie Wissink says toy makers Mattel and Hasbro will both be forced to deal with an industry-wide sales decline of between 2.5 and 5.5% in 2018 resulting from the closings, US News reported. Toys ‘R’ Us also owes Hasbro about $59 million.
The Next Shopkins
Toys ‘R’ Us didn’t just support existing and large toymakers, it was often the company that helped new and emerging toymakers get their start.
This is actually one company that could do well, according to an analyst note from Jefferies. The company’s growth has been driven by strong Hatchimal sales and its gaming segment.
SpinMaster isn’t dependent on toy retailers in the same way as Hasbro and Mattel have been. The company has diverse sales channels, selling their products at bookstores, specialty fashion, drug and grocery stores. The company even expects the Toys ‘R’ Us bankruptcy to present opportunities to acquire specialty toy brands, according to the research note.