Former Toys R Us CEO reportedly working to keep some US stores open
- Former Toys R Us and Hudson's Bay Co. CEO Jerry Storch is involved in a bid to keep potentially hundreds of Toys R Us stores operating in the U.S., according to a Bloomberg report that cited unnamed sources. Storch did not reply to Retail Dive's request for comment. Involved in the discussions, according to Bloomberg, are Fairfax Financial Holdings, the buyer of Toys R Us' Canadian unit, and Credit Suisse, which is acting as financial adviser in the talks.
- Bloomberg's story follows a New York Post story from June 6 reporting that Storch was involved with "several venture groups" that were mulling the purchase of parts of Toys R Us and bringing Storch in to manage it. Before that, in May, toy magnate Isaac Larian, who dropped his own bid for more than 200 Toys R Us stores, tweeted that he hoped "Jerry Storch and his people succeed."
- Fairfax's interest in potentially operating Toys R Us stores in the U.S. was also reported in April by the Canadian business publication Financial Post, but Bloomberg is the first to connect Fairfax to Storch. The news service also reports that Storch has recruited other former Toys R Us executives and contacted landlords about leasing space. The plan centers on combined Babies R Us and Toys R Us stores, according to Bloomberg.
Toys R Us executives and outsiders have been trying to salvage some piece of the toy seller for months now, including before the retailer announced plans to wind down. Storch's reported bid is one of the last publicized efforts, after Larian gave up. In doing so, Larian cited the retailer's lenders and their valuation of the company's assets as an insurmountable obstacle for him.
Fairfax is a credible player in any effort to keep alive a U.S. presence but something of an unknown quantity. It paid about $236 million to win the Canadian Toys R Us unit (which Larian also tried but failed to buy). Fairfax has previously acquired an upscale sports retailer and a housewares seller, among others in Canada, and typically without advanced reports or talk of a future initial public offering, Eric Matusiak, a partner with consulting firm BDO Canada, told Retail Dive this spring. In Matusiak's view, Fairfax's best bet in Canada with Toys R Us would be to go further upmarket and turn some of the store space over to experience-based retail, such as a professional gaming venue.
Storch led Toys R Us for several years after the retailer's leveraged buyout by Bain, KKR and Vornado Realty. After his departure, the company's earnings declined significantly and sales continued to erode. But not everyone at the company saw wisdom in his plans to combine the stores and operations of the toy and baby businesses. Some current and former employees told Retail Dive that the moves hurt sales for Babies R Us and did not make sense, the two categories required different approaches.
August's auction for Toys R Us' intellectual property will be a key event in the brand's fate, and will likely determine what if anything remains of the retailer after a dramatic bankruptcy process. As Debtwire legal analyst Joshua Friedman told Retail Dive in an interview, even if a buyer with an interest in operating Toys R Us as a physical retailer did not win the IP at auction, it could potentially license the brand from the winning bidder. (Whether someone would want to operate the retailer without owning the IP is another question.)
"As a general rule, some version of an operator is more likely to want the [IP] assets and value them more highly," Friedman said. But, at the same time, the company said in court papers this month it has spoken to more than 115 parties about the IP sale, indicating significant interest. (Among those Toys R Us has talked with are "major retailers, infant and juvenile consumer products businesses, brand buying and e-commerce organizations, and short-term strategic partners.")
"It's technically possible there's more value to be made in licensing," Friedman said.
A surviving, operating Toys R Us would be good news for the toy industry. After Bloomberg's story went live on Monday, Hasbro and Mattel's stock spiked. Toy makers have already made contingencies for the full liquidation of the last national toy retailer — and major retailers have made plans to dive deeper into the toy category. But a remaining presence for Toys R Us would mean a dedicated national player to provide a place to experiment, as well as a devoted stakeholder that has an interest in the category year-round and as more than a loss leader.
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