Toys R Us is gone, the reason - vampire capitalism

http://theweek.com/articles/761124/how-vulture-capitalists-ate-toys-r

Toys R Us is now said to be closing the remaining stores in the United States. News outlets will say the company was in debt, or that it couldn't turn a profit, that it couldn't compete with online retailers - these barely paint a picture of what really happened.

It's the story of vampire capitalism, a term that came to greater public attention in recent years back in 2012 during the Presidential run in which Republican candidate Mitt Romney's Bain Capital came under scrutiny for how it would acquire and bleed companies dry. Essentially, a company like this would seize a controlling share of a company by borrowing money that once they acquired the company they were targeting, in other words, a leveraged buyout, that company would be responsible for the debt used to acquire them. While the companies would drown in debt that the new vampire capitalist created, they'd charge the target company things like "consultant fees" until they sucked the company dry.

Well, that's what happened here with Toys R Us, from three companies, Bain, KKR, and Vornado. Toys R Us was paying half a billion dollars a year in just interest payments on the debt these companies use to take control of Toys R Us. In the years Toys R Us was losing money, their loses were considerably smaller than the debt interest payments they were forced to pay out. Safe to say, if these companies never came around to interfere with Toys R Us, there'd be 33,000 people who'd still have jobs, and an iconic American toy retailer who'd still be around. And who knows, maybe they'd been able to expand into stronger online retailer if half a billion dollars each year wasn't going to pay off the debt these three companies created.

I've heard of this before. Seems like a really dickish move to make. And why is it legal again?

This is an interesting article and if its actually true, then it's just going to show how sick Wall Street are.

Also if they really did do kinda ok, I am sure there will be some buyers ready to pick it up and continue the stores.

Amazon may do like Wal-mart did and buy a physical store to broaden their reach.

As the OP mentioned, this is not the first case of such occurring, and articles on those have been written in the past. Nothing will come of this.

Toys R Us is not the "just needs polished" diamond you're thinking. Over a decade of trying to stay afloat has hampered it's modernization. It has a weak e-commerce presence and it's physical stores have fallen into disrepair.

Well, that is also what I thought but if it has 20% of the sales, it´s not a small player on the market and with a proper owner, it could be molded into something that could do pretty well, with a healthy e-commerce.

Mobsters basically run this same scam. They’ll take over a business in all but name, beat up the owner, and force him to borrow huge amounts of money. Then they take the money and leave the business owner on the hook for the debt. IIRC Tony Soprano did this on the Sopranos and it happened in Goodfellas. Same scam here basically, but legal and on a much bigger scale. Bain Capital are basically mobsters.

called it a bust out iirc

took my 2 year old daughter to our local toys r us this weekend to spend a gc she got recently for her birthday. it's sad to me that she really will not grow up having places like that because it was always an exciting event as a child to visit a massive toy store.

"ooh, i get to browse toys on amazon now and maybe i'll get something new in 2-3 days"

just isn't the same.

Muricah!

When corporations own the politicians, it isn't hard to keep laws that would prevent this off the books.

Speaking of it. Insider trading is legal for politicians I believe. :P

Part of what makes our country as great as it is. Sheltered kitties are often too spoiled by the benefits of capitalism to knowingly appreciate it

@pimphand_gamer: Who benefits from Toys R Us going bankrupt and 30k people being unemployed?

@perfect_blue: Bain, KKR, and Vornado?

:-P

Bain did the same thing to KBToys. This is why young people are socialists.

Yeah would like to know how this is legal. Seems like we've lost our balance as far as capitalism goes; I understand letting companies fail if they are no good, but at the same time if people are intentionally and publicly sabotaging companies to fail (and at the same time, hurting the American public by losing jobs), then I definitely think it's time for some government involvement. It's not big government stepping in, it would just be responsible laws.

No, it is not. And something tells me these stores would be doing fine (not amazing, but OK) if truly left alone and with good regulations in place.

This isn't capitalism. It's Wall Street people running the same scam as mobsters. Except it's legal. If mobsters did this they would be arrested for fraud. But when Bain Capital does it they are just being "shrewd businessmen."

And mobsters usually did this stuff to people who owed gambling debts. What kind of sick evil fucks do this to a kid's toy store?

You are correct:

Walmart and a couple others as they are now expanding their toy sections. I think Target was one of them but other businesses looking to capitalize on TRU's failure. Opportunities are what America is about. Get a loan or find some investors and make your own version of Toys R Us if you think it's so important...but you won't will you?

As far as employees, they only exist to make investors money. They are an asset to a company, nothing more. But I really don't think some low wage employees are going to be any worse off working at Walmart or wherever.

Because money makes the rules..........unfortunately.

TRU didn't fail due to competition though. It failed because Wall Street mobsters used the company for a bust out.

So KB toys is making a comeback? LOL WHAT YEAR IS THIS?

You're cheering the dishonest demise of a US company, consolidation of market power, and loss of competition?

lol, I'm not a Communist by any stretch but your slavish devotion to capitalism is pretty impressive.

Less competition is good, especially when they were culled in a most dishonest way?

Also, opportunities? Last time I checked, the economic mobility is pretty poor compared to other industrialized nations.

https://www.brookings.edu/wp-content/uploads/2016/07/02_economic_mobility_sawhill_ch3.pdf

Yup, the US is still a country with low economic mobility. Not exactly a land of opportunity. Especially since the lower and middle classes are doing worse off.

Toys R Us isn't out of business because of vampire capitalism (hahahaha whatever that is), it is out of business because of greed. Toys R Us was always super expensive and other companies like Amazon, Walmart, Target, and Kmart have always been significantly cheaper. I remember when the PS3 came out and one of my oldest sisters worked at Toys R Us. During launch, there was a definite lack of PS3s and she managed to snag one for me, but even with her discount we still paid like $600+.

Did you even read the article before posting some dumb anecdotal story about buying a PS3?

@bigfootpart2: I don't need to read a smear piece on capitalism. The bottom line, Toys R Us just couldn't compete.

@mecha_frieza: They seem to do just fine here. In fact last year a new TRU store opened up not so far from me.

That is because Toys´r´us in Scandinavia are franchised and not run directly by the main company.

Which is also why no stores are closing.

Did you stop to think how many people are disgruntled due to the high prices at TRU and as such decided to shop elsewhere?

Of course they don't stop to think about these things. Toys R Us has always been expensive... I will be glad to see them gone.

On average Toys R Us is exactly 4 cents more than Wal Mart. Not exactly a deal breaker.

@mecha_frieza: " I don't need to read a smear piece on capitalism. The bottom line, Toys R Us just couldn't compete."

WTH? You don't need to read an article prior to criticizing it?

Translation: I’m afraid to read anything that challenges my worldview.

lol, aren’t you one of the people that always complains about liberals shutting down discussion? Hahahaha

@mattbbpl: of course not... he’s an illiterate hick who likes to hear himself talk.

This can be avoided by not taking your company public. Once you cash in by allowing anyone to buy stock, you risk losing control of your company to folks who don't have its long term best interests at heart.

And I would be interested to know who is loaning money to these so-called vulture capitalists? Who is putting their money at risk, knowing that the end game is destroying your best hope of being paid back?

Yep. Two great companies that have stayed great by not going public immediately come to mind: Valve Corporation and Publix Supermarkets. Both are employee owned. Employees usually know what's best for the company in the long run. When you go public, you open yourself up to Wall Street scam artists who will run your company into the ground for a quick buck.

Lots of privately held corporations in this country. Two of the biggest are Koch Industries and Cargill. Simplex-Grinnell was until about 15 years ago. But the 3rd generation of the family didn't want the hard work of running a successful company, and cashed in by selling it to Tyco. Since then, they've had a CEO got to jail for fraud and embezzlement, and recently was saved from hard times by merging with Johnson Controls Inc. JCI signed on to the merger to get the 15% tax rate in Ireland, where Tyco had already "moved" their HQ. I bet JCI feels like a bunch of idiots now that Trump has lowered the US corporate rate.

The last game I purchased was Mafia 3 a few weeks back. TRU had it available for $29.99 while Walmart offered it for $19.99 (online) and in store for $14.88. GS even had it about the same price as Walmart. Care to guess where I bought it? Gamewise I do not purchase new games at TRU because the savings I get at Target (with the red card) and BB (with the GCU) is substantially cheaper than four cents. Even Amazon Prime offers a big discount. Did TRU have an incentive program like the three stores I mentioned?

This isn't really a discussion, I mean at this point the discussion should be over. Toys R Us is going out of business in the U.S.- awesome, but to blame it on "vampire capitalism" is just ridiculous. Perhaps if they were more competitive in their prices they would still be around.

Why is it ridiculous? You've admitted to not reading the article, so I'm not exactly sure what you even have to contribute here.

There's a lot more to it than being "more competitive in their prices". Why do right-wingers always simplify complex problems?

@perfect_blue: Not sure why you're bothering. Once someone says they didn't read the article and refuses to address the information there in, the conversation is over. All you can do is stand back and watch as they wallow in their self imposed ignorance.

How can you be competitive when someone has used your company to rack up massive debt and is bleeding you dry?

there can ( and usually are ) more than one cause for these kinds of things.

@mecha_frieza: "hahahaha whatever that is"

Why are you taking pride in being ignorant?

He's a proud trump supporter. Enough said.

Charles Lazarus, the founder of Toys R Us, passed away recently.

Wait, did somebody in this thread blame Toys R Us for charging $600 for the PS3 at launch?