General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsBain Capital contributed to the demise of Toys "R" Us
The private-equity companies swooping in to buy floundering retailers may ultimately be hastening their demise.
Ann Marie Reinhart was one of the first people to learn that Toys R Us was shuttering her store. She was supervising the closing shift at the Babies R Us in Durham, North Carolina, when her manager gave her the news. I was almost speechless, she told me recently. Twenty-nine years ago, Reinhart was a new mother buying diapers in a Toys R Us when she saw a now hiring sign. She applied and was offered a job on the spot. She eventually became a human-resources manager and then a store supervisor.
She stayed because the company treated her well, accommodating her schedule. She got good benefits: health insurance, a 401(k). But she noticed a difference after the private-equity firms Bain Capital and Kohlberg Kravis Roberts, along with the real-estate firm Vornado Realty Trust, took over Toys R Us in 2005. It changed the dynamic of how the store ran, she said. The company eliminated positions, loading responsibilities onto other workers. Schedules became unpredictable. Employees had to pay more for fewer benefits, Reinhart recalled. (Bain and KKR declined to comment; Vornado did not respond to requests for comment.)
Reinharts store closed for good on April 3. She was granted no severancelike the more than 30,000 other employees who are losing their job with the company.
In March, Toys R Us announced that it was liquidating all of its U.S. stores as part of its bankruptcy process, which began last September. Observers pointed to the companys struggle to fight off new competition. In its court filing, the company laid the blame at the feet of Amazon, Walmart, and Target, saying it could not compete when they priced toys so low.
Less attention was paid to the albatross that Bain, KKR, and Vornado had placed around the companys neck. Toys R Us had a debt load of $1.86 billion before it was bought out. Immediately after the deal, it shouldered more than $5 billion in debt. And though sales had slumped before the deal, they held relatively steady after it, even when the Great Recession hit. The company generated $11.2 billion in sales in the 12 months before the deal; in the 12 months before November 2017, it generated $11.1 billion.
Saddled with its new debt, however, Toys R Us had less flexibility to innovate. By 2007, according to Bloomberg, interest expense consumed 97 percent of the companys operating profit. It had few resources left to upgrade its stores in order to compete with Target, or to spiff up its website in order to contend with Amazon. Its true that they couldnt respond to Amazon, Eileen Appelbaum, a co-director of the Center for Economic and Policy Research, told me. But you have to ask yourself why.
https://www.msn.com/en-us/money/companies/the-demise-of-toys-r-us-is-a-warning/ar-AAyAGSv?li=BBnb7Kz
sinkingfeeling
(51,460 posts)KG
(28,751 posts)KT2000
(20,583 posts)does it ever show how the purchasers made out by loading debt, collecting fees and interest, and otherwise destroying a company. For all that they probably get a tax write-off.
Hoyt
(54,770 posts)downgraded to junk. Dont like Bain either, and Im sure they made money off the deal, buy Toys owners had already made mistakes that doomed it in a changing market before Bain was involved.
malaise
(269,054 posts)appalachiablue
(41,146 posts)K & R
Initech
(100,081 posts)Xolodno
(6,395 posts)...Payday Loan companies are to people.
Problem is, Capital Firms take out everyone in the company.