We all knew it was coming, and as I pointed out earlier this month, we know who's largely to blame: Iconic toy retailer Toys "R" Us has filed for Chapter 11 bankruptcy protection in the United States, and will soon take similar steps (CCAA) in Canada. In the later hours of September 18, 2017, Toys "R" Us made it official, voluntarily filing for relief in the U.S. Bankruptcy Court for the Eastern District of Virginia in Richmond, and sharing the news via press release. It's important to note that while this news is serious, companies restructure and emerge from Chapter 11 all the time, though the companies with ownership stake in Toys "R" Us - particularly Bain Capital - leave much to be desired.
[Updated 9/18/2017 - 11pm CST - Toys "R" Us filed for Chapter 11 Bankruptcy Protection]
There's a big problem at Geoffrey's house, and if you follow the toy industry or the retail sector in general, then you've no doubt seen it coming for years. Retail is a challenging space to begin with, and when you look at specialty retail, the landscape gets even bumpier. When it comes to toys, there's only one major toy store left in the United States, and that's New Jersey-based Toys "R" Us. While they've had their share of issues over the years, one thing that's really bothered me has been the involvement of Bain Capital Partners since 2005, at which time they, along with Kohlberg Kravis Roberts and Vornado Realty Trust took part in a leveraged buyout of of the iconic toy retailer. There's a lineage here in which Bain Capital has notoriously taken successful companies, saddled them with debt, and eventually flushed them down the toilet, all while the "partners" make out like bandits. One such victim was KB Toys, who Bain targeted as a profitable business with over $1.4B of annual sales. Strapped with debt, bankruptcy followed, and eventually KB was dead. History has been known to repeat itself, and it looks like Toys "R" Us could be the next victim. After all, Bain is playing the same game right now with another retailer - Gymboree, who was acquired in 2010 and filed for bankruptcy in 2017.