You never know how much you’ll miss something until it’s gone. We’ve all been burned before and in the world of bankruptcy financing there may be no greater pleasure than profiting from the demise of your borrower.
On Monday, October 1st it was announced that the lenders that took control of Toys “R” Us canceled their plans to auction the company’s intellectual property. Assets like Geoffrey the Giraffe and the Toys “R” Us and Babies “R” Us names still have inherent value and while the new owners can make a quick buck from the sale of these assets they’d rather try their hand at reviving the retailer.
Why?
A while back I wrote about the demise of Toys “R” Us. I explained how the retailer was suffocated by a mountain of debt that required it to make interest payments of $450 million annually and how those payments made it impossible for the retailer to invest in necessary location updates, marketing, product acquisition, and supply-chain/logistics improvements.
Well now they’re out from that debt. They might not have any staff, retail locations, or inventory but they don’t have $450 million in annual payments to make either. More importantly the business was operationally profitable, meaning their retail operations generated a substantial profit, it was that annual payment that did them in.
Should we expect new stores in time for the holiday season? Probably not. Those orders were placed months ago and even if they could get a few million pieces of inventory in a month they wouldn’t have anywhere to put them. No stores, distribution, or fulfillment centers — not even a Shopify drop-shipping storefront. But you can be sure they’ll try.
After all, it’s that feeling of melancholy and the promise that it can be cured that pushes so many to open up their wallets. If they do pull it off and manage to open stores in 2019 expect the first purchases not to be from people looking for the hottest toy but from those trying to re-capture a memory of their childhood.