Toys “R” Us Brand Check-up: A Name That Outlived Its Stores
Toys “R” Us closed its last U.S. stores in June 2018. Six years later, the name is back inside Macy’s stores and in a brand film made with artificial intelligence. We looked at how a buyout funded with debt and an early online deal with Amazon wore down a famous retailer, and whether the revival gives shoppers a reason to come back.
Key takeaways
- The 2005 buyout left Toys “R” Us with debt that cost about $400 million a year in interest by 2017, money that could have gone into stores and service.
- The 2000 Amazon deal put the company’s online orders, delivery and customer service in another company’s hands until a court ended the alliance in 2006.
- The U.S. chain filed for Chapter 11 in September 2017 and closed its last stores in June 2018, while the Canadian business was sold to a Fairfax affiliate.
- Under WHP Global the name lives on through partners and shops inside Macy’s, but it still needs a reason for parents to choose it beyond nostalgia.
Download the full Toys “R” Us Brand Check-up (PDF): vital signs, timeline, diagnosis, treatment and sources.
The buyout and the debt
In March 2005, KKR, Bain Capital and Vornado Realty Trust agreed to buy Toys “R” Us for $26.75 a share, a $6.6 billion deal plus assumed debt. The price was an 8% premium to the $24.77 close the day before, and more than double the $12.02 close of January 7, 2004. The deal closed on July 21, 2005, and the company left the stock market. By January 28, 2006, about six months later, its total debt was $5,947 million.
Debt sets the budget for everything else. When the company filed for bankruptcy in 2017, it was paying about $400 million a year in interest on about $5.2 billion of debt. Every dollar of interest was a dollar not spent on stores, staff, prices or the website, the parts of the business shoppers actually see.
The Amazon deal
Before the buyout, the company made a different bet. In August 2000 it signed a ten-year deal with Amazon for a co-branded toy site. Toysrus.com chose and bought the stock. Amazon stored it, shipped the orders, handled customer service and collected fixed annual payments, per-unit payments and a share of revenue.
The partnership soured. Toys “R” Us sued Amazon in May 2004 and won a court order ending the alliance on March 31, 2006. In 2009 Amazon agreed to pay $51 million to settle. The money did not buy back nearly six years in which another company stored, shipped and serviced the online orders of one of the best-known names in toys.
Bankruptcy and liquidation
Sales were slipping before the end. In fiscal 2016, net sales fell 2.2% to $11.54 billion, domestic comparable sales fell 1.3%, and the company reported a net loss of $36 million. It filed for Chapter 11 in September 2017 with about 1,600 stores. In March 2018 it said it would close or sell all 735 U.S. stores, with about 31,000 jobs at risk. The last U.S. stores closed at the end of June 2018.
Canada was the exception. An affiliate of Fairfax Financial bought Toys “R” Us Canada for C$300 million, in a deal that closed on May 31, 2018.
The brand after the stores
In March 2021, WHP Global took a controlling stake in Tru Kids, the owner of the Toys “R” Us name. Five months later, Macy’s agreed to add Toys “R” Us shops to more than 400 of its stores in 2022. By then the brand’s only two U.S. stores, in New Jersey and Texas, had closed during the pandemic. WHP says 452 shops opened inside Macy’s in 2022, and in October 2023 it announced plans for at least 24 U.S. flagship stores starting in 2024. In June 2024 the brand said it had more than 1,400 stores and e-commerce businesses in 32 countries, with more than $2 billion a year in global retail sales.
In June 2024, the brand premiered a film of about one minute made with OpenAI’s Sora at the Cannes Lions festival. It retold the founder’s story and brought back Geoffrey the Giraffe. Criticism followed within days, and author Theo Priestley called it an “abomination”.
Our diagnosis
We see three linked causes behind the collapse. The buyout debt took cash the stores needed. The Amazon deal handed the online customer relationship to another company for nearly six years. And the stores stopped growing, with comparable sales falling even before the filing.
The revival has a different problem: high recognition and little to say. A clear brand position would tell parents why to choose Toys “R” Us over the toy aisle of a general retailer.
Partner deals, shop counts and a nostalgic film are tactics, not strategy. The strategy has to explain why the name matters now, and every partner shop has to deliver it.
What growing companies can learn
Own your customer relationship, especially online. Treat debt and fixed costs as limits on your marketing budget. And when a famous name returns, give people a current reason to choose it. An honest marketing audit asks the hard question early: if the name disappeared tomorrow, what would customers miss?
This check-up uses public information available on July 23, 2024. It is brand and marketing analysis, not investment advice.
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Brand Doctor is based in Vancouver and offers a free marketing diagnosis to businesses across Canada, in person or remotely. You leave knowing what’s holding growth back and what to fix first.
