Geoffrey, the Giraffe, made the news once again as talks about a possible revival of the iconic Toys R Us [TOYs].
Are you emotional as I am?
It’s no secret that the 60-year-old American toy company has been going through a rough patch, closing their last 800 stores on June 29, 2018, liquidated its merchandise and completely sold everything in their stores. After making several efforts to restructure, issue bonds and introduce new products, the company made a tough decision to discontinue operations after there were halts in investments, billions of dollars in debt and the market shifting from brick and mortar.
The bankruptcy auction slated to take place this month was cancelled due to unattractive bids on the company’s assets. The lenders who are now in control of the retail giant are trying their very best to revive the brands of Toys R Us and Babies R Us so that they can maximize the value of both companies by opening new retail stores.
Seth Freeman, Senior Managing Director at Glass Ratner Advisory & Capital group, said “The company did generate operating profit—and without debt, its profitability would be easier to maintain” but the concern remains, how long will the revival take place and will they find retail space in time Christmas, one of their most profitable seasons.
We are less than 3 months away!
The good news is this generation is still aware of the brand, the bad news is the markets are shifting from brick and mortar. Toys are always in demand as children are born every day however post-millennials gravitate towards the digital world.
But not everyone is sentimentally happy about this [TOYs] rival. Thousands of former Toys R Us employees are still waiting for a total of $75 million in severance pay and some go as far as to call the re-emergence as a “PR stunt”.
The company is reported to be $7.9 billion in debt versus $6.6 billion in assets when it filed for bankruptcy in it’s last years. While the brand name and Geoffrey have value these are not liquid, so unless the company sheds it’s debt and major costs, a turnaround may not be feasible.
There’s a saying “Once bitten, twice shy”, but how eager will suppliers be to resume trading with [TOYs]? It is only fair to be a bit sceptical about providing goods to a company that failed. It may be a risk worth taking for hedge funds and angel investors but how sustainable will the company be?
Can Santa pull off a Christmas miracle?
Or is Amazon [NASDAQ: AMZN] forever on Santa’s nice list?
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