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Points of Articulation

The Killing of a Sacred Giraffe

Let's get one thing crystal clear right up front: Toys R Us closing has nothing to do with their ability to sell toys. It's not because kids are more interested in electronics today, or because Millennials aren't having babies. It has nothing to do with competition from Amazon and other online stores, or their prices being higher than Walmart's.

(These, by the way, are all excuses different news stories have given, and every one of them is false.)

Like an article profiling the way some young entrepreneur paid off his student debts that puts "he brewed coffee at home instead of buying Starbucks every day" in paragraph two and "his parents gave him a small, interest-free $100,000 loan" in paragraph eight, the people writing post-mortems on TRU are burying the lede, loath to place the blame where it really belongs: unfettered capitalism.

First, the facts: Toys R Us has announced closure and liquidation on Wednesday, March 14, though rumors had been swirling for a few months, getting more specific as information was leaked in the preceding weeks. When the company enters liquidation, all company assets are handed over to liquidators and Toys R Us corporate ceases to exist save for a small handful of positions, while everything at Toys R Us stores will be be sold to make as much as possible for the liquidators. The toys, the fixtures, the shelves, the signage, everything must go. These sales will begin on Thursday, March 22, and run until everything is gone. But how did we get here?

The 1980s were a huge time for TRU. Big sales, big growth. Then things slowed down in the '90s, and the stock prices began to fall. To protect the business, the board of directors decided to take the company private, which meant buying back all the stock that was on the market. In order for that to happen, they needed a new owner. Or "owners," as the case may be, because the company ended up being sold to a trio of investors: Vornado Realty Trust (a real estate firm, who was mostly interested in the buildings and acreage TRU occupied), KKR & Co. and Bain Capital (both private equity fims, who would have been after the actual business of the business). Buying all the outstanding stock cost these three companies $2.2 billion apiece.

But they didn't spend their own $6.6 billion to make the purchase happen. Rich assholes never spend their own money. They spend yours. So V, K and B bought TRU in a leveraged buyout: the "buyers" put up a bit of the cost, but force the company they're buying to take out loans to cover the rest; in this case, VK&B paid 20% of the price themselves, leaving Toys R Us (as an entity) to assume the responsibility for the remaining 80% - $5.3 billion. TRU had to pay back those loans just like you have to pay yours, plus they have to pay VK&B various consultant and management fees.

Oh, and if that weren't enough? In purchasing the company, VK&B agreed to take over TRU's existing $2.3 billion debt, but once the buyout was complete, they put that debt right back on the company, meaning that the new privately owned TRU was starting off $7.6 billion in the hole. That was in 2005. Since then, TRU has paid about $400 million a year toward the loans.

In 2017, Toys Я Us posted a net loss of $29 million. That's a whole lot. But take away their $400 million loan interest payment, and you'll see that Toys Я Us actually sold $371 million worth of toys last year. Again: without the VK&B debt, that would be $371 million in profit. That's why ignorant claims like this one:

...are complete crap. Toys R Us is very good at selling toys. Estimates vary, but 15-20% of all US toy sales came through Toys R Us. Think about that: 20%. One out of every five toys sold in America has Geoffrey's hoofprints on it. They're not competing against just Walmart and Target, but every grocery store, pharmacy, gas station, mall kiosk, GameStop, bookstore, calendar store, game store, comic shop, department store, and hundreds if not thousands of small-time websites - literally anywhere you can buy any new toy - and yet TRU owned a fifth of the industry. But people still say the blame lies with Toys R Us.

I have tried really hard not to get incredibly angry and frustrated over this, but the overwhelming sentiment online - that Toys R Us was bound to go out of business due to competition and the changing times - is absolutely false. They fell victim to the asshole American financial industry that specifically exists to rape and pillage. The debt-laden leveraged buyout by Bain Capital, KKR & Co. and Vornado Realty Trust ensured that there was no way TRU could succeed; no matter how much revenue TRU could generate there was no way it was going to be able to repay the escalating debt. These repulsive deals are commonplace in America, leading to unbelievable amounts of businesses closing and jobs lost while bankers get richer, and what's worse here is that all of the TRU stores closing is going to have an unprecedented impact upon our hobby.

Large companies like Hasbro and Mattel consider them a major vendor of their product and specifcally base business decisions around Toys R Us. They'll suffer some blows, but they should still be okay thanks to their relationships with the remaining giants, Walmart and Target. But think smaller.

How much of NECA's business comes from TRU? Is Walmart suddenly going to start carying Ash vs. Evil Dead and Texas Chainsaw Massacre figures one aisle over from the Fingerlings and Roblox? NECA chooses its licenses based on whether or not something will sell enough units to cover the costs; how many potential new toys will we lose out on because a huge portion of the sales have now evaporated?

Diamond Select Toys makes releases specifically for Toys R Us - not just the exclusive Minimates, but the budget-friendly versions of their various "_____ Select" lines, where you can get the basic figure without all the extravagant pack-ins. Want some Ghostbusters toys, but don't care about the diorama BAF? TRU had your hookup, fam, and saved you like $10 a pop. Is Target going to pick up that ball and run with it?

With their new "Collector Vector" section, TRU was stocking Japanese import toys you'd normally have to buy online. Figma, MAFEX, Figuarts, Robot Damashii... a decade ago, could you imagine being able to walk into your local brick-and-mortar store and pick those kinds of things up off the shelf? And is anyone else going to start carrying them now?

Toys Я Us put their weight behind a lot of things that otherwise might never have seen the light of day. In the 2000s, they were the first to help Masters of the Universe start its comeback, with retro figures in commemorative packaging. Several times they've been the only store carrying GI Joe product, giving the brand extra years. Transformers fans can not only thank them for carrying larger toys that no one else would, but also being the exclusive home for 90% of US Masterpiece releases. Or how about this: do you remember when you couldn't buy Lego at Walmart? For years, they just flat-out didn't carry Lego at all. But Toys Я Us did.

Toys R Us gave smaller companies a chance, and it let larger companies take chances. As this huge retailer goes down, this will be a major, major blow to the ongoing sale of the toys and figures we all love and cherish. This is more than just the end of an era we have some nostalgia for.

I have absolutely had it with terrible, smug takes on this awful news. I've read 'em all, from morons declaring this Hasbro's fault for making Star Wars toys for girls, to imbeciles chuffed that Toys R Us is going down for good because they don't stock the specific Figma figures they want, to jackasses pleased because they haven't bought anything from TRU in decades. It's just pathetic. Thousands of jobs are about to disappear. This is going to have a massive economic effect, as well as the effect on our hobby. This isn't a Free Market thing - nothing is going to fill the hole TRU leaves. Investors aren't going to want to create brick and mortar toy stores when not even Toys R Us, the iconic decades-old toy favorite, could keep going.

But the truth is, the only reason - the only reason - that TRU is going under is because nightmare American companies like Bain can abuse laws to load it with debt and reap the profits. Proponents of a completely unregulated market claim that competition will make businesses stronger, but they completely ignore the ways rich bastards who DGAF can make money by ruining those same businesses from within.

Frankly, the idea that our hobby should be all, or mostly, online should deeply bother us all. If you can't see the toys you're buying, you can't tell what the quality will be like, and horrible profit-driven companies like Jazwares are going to exploit that. Not to mention how big companies like Mattel and Hasbro are going to cut back on making toys because a huge chunk of their product sales are about to completely disappear. This is not overstating the problem this series of events presents.

So if you want to blame someone for the loss of Toys Я Us, stop trying to claim it's because you had to pay 19¢ more for a toy there than you did at Walmart, and start admitting it's the fault of predatory financiers who are given free rein to ruin the economy because anything else would be be "limiting the free market."

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