Toys 'R' Us founder Charles Lazarus dies days after the chain says it's closing
Charles Lazarus, who founded Toys "R" Us 70 years ago, died Thursday, a week after the company announced it will be forced to shut down its U.S. operations.
Lazarus, 94, no longer held a stake in the chain. He started the company
in 1948 when he was 25, anticipating that the post-war baby boom would
create demand for baby supplies and toys. He remained CEO until 1994.
"He was the father of the toy business,"
said Michael Goldstein, who succeed him as CEO. "He knew the toys and
loved the toys and loved the kids who would shop in the stores. His face
lit up when he watched kids playing with toys."
His death was confirmed by the company. Related: The Toys 'R' Us liquidation sales are coming
"There have been many sad moments for Toys "R" Us in recent weeks, and none more heartbreaking than today's news about the passing of our beloved founder," Toys "R" Us said in a statement. "He visited us in New Jersey just last year, and we will forever be grateful for his positive energy, passion for the customer and love for children everywhere. Our thoughts and prayers are with Charles' family and loved ones."
He started selling baby furniture in a store called Children's Bargain Town in Washington, D.C. But he quickly expanded to selling toys.
Toys R Us may sell assets and close all U.S. stores
Toys ‘R’ Us Considers Closing All of Its U.S. Stores
Sources say the toy chain, which filed for bankruptcy protection in September, is evaluating bids to liquidate the locations
Troubled toy chain Toys “R” Us Inc. is preparing to liquidate all of its U.S. stores and abandon efforts to restructure through the bankruptcy process, people familiar with the matter said, after a weak holiday season torpedoed plans to reorganize.
Customers shop at a Toys R Us store in January in Highland Park,
Ill. The store is one of more than 180 Toys R Us and Babies R Us stores
the company said earlier this year it would close. Now, the entire chain
may be shut down.
Toys
R Us Inc. is making preparations for a liquidation of its bankrupt U.S.
operations after so far failing to find a buyer or reach a debt
restructuring deal with lenders, according to people familiar with the
matter.
While
the situation is still fluid, a shutdown of the U.S. division has
become increasingly likely in recent days, said the people, who asked
not to be identified because the information is private. Hopes are
fading that a buyer will emerge to keep some of the business operating,
or that lenders will agree on terms of a debt restructuring, the people
said.
The
toy chain's U.S. division entered bankruptcy in September, planning to
emerge with a leaner business model and more manageable debt. A new $3.1
billion loan was obtained to keep the stores open during the turnaround
effort, but results worsened more than expected during the holidays,
casting doubt on the chain's viability.The situation has also deteriorated for many of the retailer's overseas divisions, which weren't part of the bankruptcy. Toys R Us's U.K. unit put itself in the hands of a court administrator after discussions about selling the business fell apart. Its European arm is seeking takeover bids.
Talks are being held to offload the growing Asian business, the company's most profitable arm. It's not yet clear what will happen to the Canadian unit, which filed at the same time as the U.S. division.
The
company entered this year with more than 800 stores in the U.S. — under
both the Toys R Us and Babies R Us brands. In January, it announced the
shuttering of 180 locations.
A representative for Wayne, N.J.-based Toys R Us declined to comment.
The
news sent shares of the biggest toymakers tumbling in late trading.
Mattel Inc. fell as much as 6.1%, while Hasbro Inc. declined 3%.
Toys
R Us's $583 million of first-lien bonds due in 2021 dropped as much as 4
cents on the dollar to 83.9, according to a bond-pricing system known
as Trace. That's the biggest decline since September, the month the
company filed for bankruptcy.
The
downfall of Toys R Us can be traced back to a $7.5 billion leveraged
buyout in 2005, when Bain Capital, KKR & Co. and Vornado Realty
Trust loaded the company with debt. For years, the retailer was able to
refinance its debt and delay a reckoning. But the emergence of online
competitors, such as Amazon.com Inc., weighed on results. The company's
huge interest payments also sucked up resources that could have gone
toward technology and improving operations.
Facing
broader concerns about the brick-and-mortar industry, the company was
finally pushed to hire debt-restructuring advisers last year. Its
worsening situation, along with reports that it was considering
bankruptcy, spooked vendors — with about 40 percent of them ceasing
shipments and forcing the company to seek court protection. That quick
descent meant the retailer entered bankruptcy without a plan for how to
restructure its debt, which made finding a way to exit more difficult.
The
liquidation will be a big blow for the toy industry, as the chain makes
up about 15 percent of U.S. toy revenue. Moreover, the retailer was
willing to take chances on new products and small companies. Bigger
competitors like Walmart Inc. and Target Corp. would typically take a
more cautious approach.
It's
not unusual for bankrupt retailers to ultimately liquidate, but Toys R
Us took an optimistic stance when it filed for bankruptcy in September.
It initially pledged not to close stores, and its earnings had shown
improvement by some measures.
Toys
R Us generated $11.5 billion in sales in 2016. And though the company
hadn't reported an annual profit since its 2013 fiscal year because of
interest payments, its operating income had risen 22 percent, to $460
million.
The
company was founded in 1948 when Charles Lazarus opened Children's
Bargain Town, a baby-furniture store. Over the decades, it grew into the
largest U.S. toy chain. In the early 1990s, sales were increasing at a
10 percent annual clip.
In
more recent years, sluggish traffic and the shift online took their
toll. In the 12 months through September, Toys R Us sales declined 5
percent.
Geoffrey, LLC’s Assets to Be Acquired by Its Secured Lenders
WAYNE, NJ – October 2, 2018 – Geoffrey, LLC, Toys “R” Us, Inc.’s
intellectual property holding company subsidiary, announced today that
it is moving forward with a plan for substantially all of its assets to
be acquired by a group of investors led by Geoffrey, LLC’s existing
secured lenders.
The announcement was made following a five month marketing effort by Boston-based Consensus, an investment bank retained to market the assets of Geoffrey, LLC, that resulted in several formal and informal proposals to acquire the intellectual property assets. After considering such proposals, it was determined that the proposal from the existing term lenders was meaningfully higher and better than any other global bid or the sum of the bids received on individual assets. The transition of the business to its new owners is pending approval of the United States Bankruptcy Court and all major creditor constituencies are supportive. Geoffrey, LLC thanks all parties that participated in discussions with the company over the prior months, particularly those that submitted proposals, for their thoughtful and diligent engagement.
Geoffrey, LLC, as reorganized, will control a portfolio of intellectual property that includes trademarks, ecommerce assets and data associated with the Toys “R” Us and Babies “R” Us businesses in the United States and all over the world, including a portfolio of over 20 well-known toy and baby brands such as Imaginarium, Koala Baby, Fastlane and Journey Girls. The reorganized company will own rights to the Toys “R” Us and Babies “R” Us brands in all markets globally, with the exception of Canada. It will also become the licensor of the brands to the company’s existing network of franchisees operating in countries across Asia, Europe and the Middle East, and in South Africa.
In addition to continuing to service these markets, the new owners are actively working with potential partners to develop ideas for new Toys “R” Us and Babies “R” Us stores in the United States and abroad that could bring back these iconic brands in a new and re-imagined way. Geoffrey LLC will provide additional detail on this front as it becomes available.
For more information please contact:
press@toysrus.com
973-617-5900
Michael Freitag / Aaron Palash
Joele Frank, Wilkinson Brimmer Katcher
Tel: (212) 355-4449
The announcement was made following a five month marketing effort by Boston-based Consensus, an investment bank retained to market the assets of Geoffrey, LLC, that resulted in several formal and informal proposals to acquire the intellectual property assets. After considering such proposals, it was determined that the proposal from the existing term lenders was meaningfully higher and better than any other global bid or the sum of the bids received on individual assets. The transition of the business to its new owners is pending approval of the United States Bankruptcy Court and all major creditor constituencies are supportive. Geoffrey, LLC thanks all parties that participated in discussions with the company over the prior months, particularly those that submitted proposals, for their thoughtful and diligent engagement.
Geoffrey, LLC, as reorganized, will control a portfolio of intellectual property that includes trademarks, ecommerce assets and data associated with the Toys “R” Us and Babies “R” Us businesses in the United States and all over the world, including a portfolio of over 20 well-known toy and baby brands such as Imaginarium, Koala Baby, Fastlane and Journey Girls. The reorganized company will own rights to the Toys “R” Us and Babies “R” Us brands in all markets globally, with the exception of Canada. It will also become the licensor of the brands to the company’s existing network of franchisees operating in countries across Asia, Europe and the Middle East, and in South Africa.
In addition to continuing to service these markets, the new owners are actively working with potential partners to develop ideas for new Toys “R” Us and Babies “R” Us stores in the United States and abroad that could bring back these iconic brands in a new and re-imagined way. Geoffrey LLC will provide additional detail on this front as it becomes available.
For more information please contact:
press@toysrus.com
973-617-5900
Michael Freitag / Aaron Palash
Joele Frank, Wilkinson Brimmer Katcher
Tel: (212) 355-4449
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