9 Toys R Us stores to shut in Bay Area
Once-dominant retailer closing 20% of U.S. outlets
Mychal Powell, 31, meandered through the aisles of action figures and baby toys at Toys R Us in Emeryville with her son, Joseph, 2, while 3-month-old Clementine cooed quietly in their shopping cart.
“It’s hard to pick only one thing, right?” she said as Joseph placed an action figure back on the shelf and picked up a toy tiger instead.
Soon, children won’t be able to choose anything at the store. On Tuesday, Toys R Us filed plans to close up to 182 stores, or about 20 percent of its U.S. locations. The Emeryville store — a combined Toys R Us and Babies R Us — is on the list, as are 26 other California stores. Two in San Jose are closing; other Bay Area spots scheduled for closure are in Brentwood, Fairfield, Pinole, Pittsburg, San Rafael and Union City.
“I can understand and am part of the problem,” said
Powell, who does most of her toy shopping online. “There’s something about not leaving the house with two kids and being able to read all the reviews.”
The company that once dominated toy sales in the U.S. has been operating under bankruptcy protection since September, when it filed for Chapter 11 under the weight of $5 billion in debt. Toys R Us operates about 900 stores in the U.S., including Babies R Us stores. It has been hit hard by the shift to online shopping.
The closures will begin in February, and most of the designated locations, which include Babies R Us stores, will go dark by mid-April. At some other locations, Toys R Us and Babies R Us stores will be combined. The bankruptcy court still must sign off on the closings.
Toys R Us wouldn’t say how many jobs will be cut. It said some employees will be moved to other stores, and those who cannot be will get severance. Chairman and CEO Dave Brandon said Wednesday that tough decisions are required to save the company.
He acknowledged “operational missteps” during the critical holiday shopping season, when shopping at company stores and online wasn’t as easy as it should have been.
“The actions we are taking are necessary to give us the best chance to emerge from our bankruptcy proceedings as a more viable and competitive company that will provide the level of service and experience you should expect,” he said in a letter to customers.
Fewer than a dozen people were at the Emeryville store around noon on Wednesday. The shelves were stuffed with dolls and Legos. Rocking chairs stood empty in the middle of the store.
Adjani Morrison, 23, of Oakland pushed a cart of diapers through the store. He started working at the toy store in September and said managers alerted the staff Tuesday that the store would be shutting down by the end of April and that they would have to find other jobs.
A student at Berkeley Community College with hopes of transferring to Cal State East Bay in 2019, Morrison said his wages help with his budget for school and other activities. He hasn’t started looking for a new job yet.
“I grew up coming to this store,” he said. “It’s crazy this store is not going to be around anymore.” It is, he added, “the main place to get baby stuff for the community.”
Gerrick Johnson, an analyst at BMO Capital Markets, had estimated that holiday sales at the company’s North America stores were down more than 10 percent. He attributed much of the decline to people’s confusion around the bankruptcy filing and a fear of buying gifts at Toys R Us because they thought they wouldn’t be able to return them if needed. Johnson also blamed a weak marketing campaign and email promotions that didn’t create a sense of urgency.
Toys R Us, based in Wayne, N.J., has struggled with debt since private-equity firms Bain Capital, KKR & Co. and Vornado Realty Trust took it private in a $6.6 billion leveraged buyout in 2005. The plan had been to take the company public again, but weak sales have prevented that. Given its debt levels, Toys R Us has not had the financial flexibility to invest in its business.
Meanwhile, other stores like Target have been increasing their assortment of toys.
While its sales numbers have been shrinking, Toys R Us still sells about 20 percent of the toys bought in the U.S., according to Stephanie Wissink, an analyst at Jefferies LLC. Toymakers will feel the impact: She estimated that Toys R Us accounts for about 11 percent of Mattel’s annual sales and about 9 percent of Hasbro’s annual volume.
Competitive pressures will force Toys R Us to examine all its stores, and more probably will be shuttered over the next year or two, Wissink said.
Toys R Us reigned supreme in the 1980s and early 1990s, when it was one of the first of the “category killers” — a store totally devoted to one thing, in this case toys. Its scale gave it leverage with toy sellers, and it disrupted general merchandise stores and mom-and-pop shops. Children sang along with commercials featuring the mascot, Geoffrey the giraffe.
Now Toys R Us and other category killers like the now-defunct Sports Authority, Borders and Circuit City are being upended by Amazon and online shopping. More than three dozen retailers sought bankruptcy protection last year, due in large part to radical shifts in where people shop and what they buy.
Global Data Retail estimates that nearly 14 percent of toy sales happened online in 2016, more than double the level five years ago.
Xinfeng Lin, 46, of Oakland went to the Emeryville store to buy her 4-year-old son, Rish Sheth-Lin, a birthday gift. He had asked for a “rescue bot transformer,” she said.
News of the closure isn’t surprising, she said, but it’s still disappointing.
“I don’t want to live in a world where there’s no stores if I shop online,” Lin said. “This creates jobs for people, and you come in here and interact with people. It’s not the same as shopping online.”