More: Silicon Valley has gone from liberating to creepy. But it could not overcome its overseers’ burden of debt. When the closing was announced, the retail chain still held about one-fifth of U.S. That Toys R Us was a mastodon facing an Amazon asteroid doesn’t hold water. Their closings will create thousands more lost jobs. Both were acquired by private equity executives that loaded them up with unsustainable debt. In recent weeks, Remington, the 200-year old gunmaker, and Winn-Dixie, the popular supermarket chain, filed for bankruptcy protection.
Worse yet, Toys R Us notified its workers that their severance plans were being nullified. The shuttering of Toys R Us' more than 800 stores will mean the loss of at least 30,000 jobs, including 1,600 in New Jersey. Once private equity squeezes out whatever dividends it can, too often the businesses close. An otter cracks open a clam before discarding the shell, and so do these firms: Toys R Us owners reportedly walked away with more than $200 million. Simultaneously, their new possessions are left holding debt they cannot pay. In practice, these deals favor the equity tycoons who help themselves to enormous bonuses. But how could Toys R Us innovate or change course while weighed down by that anchor? Finance executives justify leveraged buyouts by claiming that they allow ailing companies to become leaner and more financially nimble in a way that protects the business and its workers.
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When Toys R Us was purchased, its new owners tethered that $5 billion of debt plus annual interest payments of $400 million to its neck. In 2005, three Wall Street firms paid more than $6 billion for the company, but only $1.2 billion came from their own pockets the rest was borrowed. Another part belongs to private equity, whose methods of leveraging immense debt are wreaking havoc on the retail landscape. The so-called Retail Apocalypse can be attributed to Amazon and Walmart, but this is only part of the story. I followed the company’s tribulations, and when I studied its collapse, the circumstances angered me. More: Donald Trump's attacks on Amazon are transparently politicalīefore a new congressional map removed it from my district in 2012, I was proud to represent the Toys R Us headquarters. Through his farsightedness, he built a colossus that conquered America with Geoffrey the Giraffe and a ubiquitous jingle that was music to the ears of kids. Entering Baby Boom and suburban sprawl, Lazarus understood that families would have more money for luxuries such as children’s playthings. Toys R Us is one of the classic business successes of postwar America. This fate has befallen many storied companies before Toys R Us, and without congressional action, more businesses could soon vanish. Yet the closing of one of the world’s most recognizable brands did not come solely from e-commerce but also from pillaging by pirates. Obituaries for both have implied that Toys R Us was a retail relic. His passing came one week after the company he founded, Toys R Us, announced its liquidation after 70 years in business. The brilliant New Jersey entrepreneur Charles Lazarus died March 22 at age 94. Watch Video: 5 ways Toys R Us impacted our childhood
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