The End of Toys ‘R’ Us: What to Expect and How to Handle It

To the shock and dismay of many parents, children, and other toy enthusiasts, Toys ‘R’ Us (“TRU” to the cool kids) recently announced the liquidation of its operations. The retailer filed bankruptcy late last year hoping to restructure and bounce back, but holiday sales were not enough to maintain a feasible reorganization plan to continue the business. Stores across the country - and all over the world - will be shutting their doors for good in the very near future, marking the demise of the last true dedicated brick-and-mortar toy chain.

Dellutri_Law_Group_Toys.jpgAs a former “Toys ‘R’ Us Kid”, and a current collector, this news is particularly upsetting for me. Although I am (technically) an adult now, I frequently enjoyed browsing the isles of TRU on lunch breaks and weekends, eagerly hunting for newly-released items or particularly good clearance deals. As a passionate collector of Legos, action figures, and other cartoonish memorabilia, perusing the hallowed halls of TRU helped me maintain a youthful enthusiasm and a sense of child-like wonder that I think escapes many of us as we grow older and settle into “adult” lives.

So, naturally, as a frequent customer and a bankruptcy attorney, I’ve been closely following the tale of TRU since before the bankruptcy was even announced. Big box stores like Target and Walmart have long been chipping away at TRU’s market share, and the growing trend of internet transactions, mostly with juggernaut retailer Amazon, has made it even more difficult for brick-and-mortar specialty stores like TRU to turn a profit. While TRU is a dedicated toy store with a much better selection than any other physical store, its prices have always been notoriously high, presumably to pay for the massive overhead that doesn’t burden its main competitors nearly as much. The advent of the smartphone made it nigh impossible for TRU to justify its prices, and savvy toy hunters could browse TRU for items they could get cheaper online – usually with fast and free shipping. Accordingly, the writing has been on the wall for TRU’s demise; personally, while it absolutely pains me to say it, I’m surprised that TRU lasted as long as it did.

There have been lots of news stories and rumors of varying veracity regarding the fall of TRU over the last few weeks. Many consumers have misconceptions about the current state of TRU and the likely path that its liquidation will take. Even yesterday, before any official public announcement from the retailer as to its closure, people swarmed to the Fort Myers store hoping to scoop up some epic clearance deals, only to leave disappointed as there had not yet been any markdowns whatsoever. You certainly don’t have to take my word for it (and, fair warning, some of this is educated speculation), but as a bankruptcy attorney, a toy collector, and an avid deal hunter, here is my advice as to how to best deal with poor TRU’s situation.

  1. The liquidation of TRU is likely going to be quick and, for most shoppers, disappointing. There will be clearance deals, but they’ll be a double-edged sword. As soon as TRU makes a public announcement (and not likely before), most inventory will be marked down by a small amount. Don’t expect to see 50% off of anything right off the bat. We’re talking maybe 20%, max. Remember, even though they’re going out of business, they still have to answer to creditors through the bankruptcy process, which means they’re going to try and get as much as they can out of their inventory under the circumstances. The longer any of the stores stay open, the lower the discounts will get – but the inventory will get increasingly sparse. You probably won’t care to purchase anything that’s still left in the store by the time they start offering items for 75% off. Also, keep in mind that all sales are final, so if you buy something that turns out to be a dud, you’re stuck with it.

  2. Seriously, lower your expectations; anyone who thinks they’re going to get the really expensive, rare, or sought-after toys during this liquidation is kidding themselves. You’re not going to get that Nintendo Switch or Lego Death Star for 50% off – or even 20%. Most of the good stuff has already likely been taken off the shelves, either by shoppers who want to get it before the clearance insanity hits or by the retailer so they can send it somewhere else.

  3. If you have gift cards, blow them sooner rather than later. If your child received gift cards for Christmas and has been saving them to buy that special something, you’ll have to break the news that saving is no longer an option. Take them to spend the gift cards sooner rather than later; it’s better for them to get what they want at full price than to pick from crummy leftovers at 50% off. It doesn’t matter if you have a $5.00 or a $500.00 gift card – once the store shuts down for good they’ll all be worth absolutely nothing, and that news is a lot more heartbreaking to give a hopeful and patient child.

  4. Babies ‘R’ Us is an extension of TRU, so they will be liquidating and closing as well, and the same rules will apply to their clearance sale. If you’re the parent of a younger child, this may be a good opportunity to stock up on diapers or clothing, even if your little one won’t fit into them just yet. Many expectant parents get Babies ‘R’ Us gift cards at their baby showers – as stated above, best to go blow those puppies immediately, before the store gets ransacked.

  5. You still have to pay your TRU credit card. Sorry! Your TRU credit card is not an agreement with the TRU as a business entity; rather, the TRU brand is licensed or otherwise branded to a bank, so the money you owe on the credit card is actually owed to that bank, not the store. So don’t go down to your local TRU and max out your card thinking that you won’t have to pay it back. That may lead to you having to file your own bankruptcy.

  6. For the collectors, snag anything that’s a TRU “exclusive” item, meaning that only TRU sells it. When the store closes, the item will no longer be sold, obviously. Those items, if left in good condition (which usually means sealed in the box and not played with) are most likely to appreciate in value over time. Again, these will be the first items to go, so I suggest buying now, before the clearance sale.

  7. Be nice to the employees. The situation isn’t their fault, and they will be more restricted than usual as to what they can and can’t do for you. Remember, as disappointed as we all are that TRU is closing, they’re much more disappointed to be left with no jobs and no severance. Some of those employees just work there to pay the bills, but a surprising number of work there because they love kids and they love being a part of something that puts a smile on their faces. Under these circumstances, a kind word may go a long way.

The most important points (for those of you who are members of the “too long; didn’t read” movement) are: (1) if you’re hoping to get something from TRU before they close, go now; (2) don’t wait for clearance prices to get better, because inventory will be mostly gone by the time any really good discounts hit; (3) spend gift cards as soon as you can to avoid having to pick from junk.

Farewell, Toys ‘R’ Us. I knew thee well.