WEBVTT 00:00:00.000 --> 00:00:01.659 I want you to close your eyes for a second. We 00:00:01.659 --> 00:00:03.379 are going to do a little sensory time travel. 00:00:03.500 --> 00:00:05.620 Okay, I'm with you. It's a Saturday afternoon 00:00:05.620 --> 00:00:10.199 in, say, 1994. You're seven years old. You've 00:00:10.199 --> 00:00:12.400 just walked through a set of automatic sliding 00:00:12.400 --> 00:00:14.539 doors that rattled a little on the tracks. I 00:00:14.539 --> 00:00:17.739 can hear them. That specific, slightly rickety 00:00:17.739 --> 00:00:20.000 sound. The air conditioning hits you first. It's 00:00:20.000 --> 00:00:23.879 freezing cold. And then the smell hits you. It 00:00:23.879 --> 00:00:26.719 is a very specific industrial cocktail. Oh, yeah. 00:00:27.239 --> 00:00:30.199 That smell. Off -gassing vinyl from inflatable 00:00:30.199 --> 00:00:33.100 pool toys, a little bit of floor wax, maybe some 00:00:33.100 --> 00:00:36.500 stale popcorn, and cardboard. Lots of cardboard. 00:00:36.780 --> 00:00:38.840 It is a core memory for, I think, at least three 00:00:38.840 --> 00:00:42.380 generations of consumers. That smell is practically 00:00:42.380 --> 00:00:44.619 part of the American DNA at this point. It really 00:00:44.619 --> 00:00:47.219 is. It was the smell of sheer unadulterated possibility. 00:00:47.600 --> 00:00:50.479 Exactly. It was the smell of, I might leave here 00:00:50.479 --> 00:00:53.969 with a super soaker. But we aren't here today 00:00:53.969 --> 00:00:56.229 just to wax poetic about Jeffrey the giraffe 00:00:56.229 --> 00:00:58.189 or getting your first Game Boy. Or the anxiety 00:00:58.189 --> 00:01:01.090 of the little ticket booth for video games. Oh, 00:01:01.149 --> 00:01:04.370 the ticket system. We are here because as of 00:01:04.370 --> 00:01:07.489 today, Valentine's Day, February 14th, 2026, 00:01:07.810 --> 00:01:11.890 we are looking at perhaps the strangest business 00:01:11.890 --> 00:01:14.489 case study on the 21st century. It really is 00:01:14.489 --> 00:01:16.629 unique. We are looking at a company that didn't 00:01:16.629 --> 00:01:19.269 just go bankrupt. It didn't just restructure. 00:01:19.370 --> 00:01:22.269 Yeah. It was liquidated. It was dead. Its pulse 00:01:22.269 --> 00:01:26.310 was zero. In 2018, the U .S. operations ceased 00:01:26.310 --> 00:01:29.659 to exist. And yet. Here we are. If you drive 00:01:29.659 --> 00:01:32.819 past the Chicago premium outlets in Aurora, Illinois 00:01:32.819 --> 00:01:35.159 right now, or the Camarillo premium outlets in 00:01:35.159 --> 00:01:37.540 California, or walk through the Dallas -Fort 00:01:37.540 --> 00:01:39.959 Worth airport. What do you see? You see the backwards 00:01:39.959 --> 00:01:42.599 R. You see Jeffrey. You see glistening brand 00:01:42.599 --> 00:01:44.680 new stores. It is the retail equivalent of a 00:01:44.680 --> 00:01:47.040 zombie movie. But unlike a zombie, which usually 00:01:47.040 --> 00:01:49.079 looks a bit ragged, this brand is actually looking 00:01:49.079 --> 00:01:50.799 quite healthy. That's a great way to put it. 00:01:50.840 --> 00:01:53.239 It's arguably the most complex, chaotic, and 00:01:53.239 --> 00:01:55.379 fascinating resurrection story in modern business 00:01:55.379 --> 00:01:57.819 history. That is the tension we need to unpack 00:01:57.819 --> 00:02:01.689 today. How does a brand die so completely? I 00:02:01.689 --> 00:02:04.909 mean, we're talking 33 ,000 people fired, 735 00:02:04.909 --> 00:02:09.169 stores gutted, lawsuits, anger, and then claws 00:02:09.169 --> 00:02:11.669 its way back to being a global brick and mortar 00:02:11.669 --> 00:02:14.289 player just eight years later. And to understand 00:02:14.289 --> 00:02:16.960 that, we have to look past the nostalgia. It's 00:02:16.960 --> 00:02:19.099 so easy to get caught up in the, you know, I 00:02:19.099 --> 00:02:21.340 don't want to grow up jingle. Right. This isn't 00:02:21.340 --> 00:02:23.580 a story about toys. It's a story about private 00:02:23.580 --> 00:02:26.000 equity engineering, a catastrophic misunderstanding 00:02:26.000 --> 00:02:28.759 of the Internet, and a brand that somehow became 00:02:28.759 --> 00:02:32.039 more valuable as a ghost than it was as a living 00:02:32.039 --> 00:02:34.770 company. So our mission for this deep dive is 00:02:34.770 --> 00:02:37.289 to really dissect the anatomy of this resurrection. 00:02:37.669 --> 00:02:40.129 We're going to look at the air, land and sea 00:02:40.129 --> 00:02:42.629 strategy that's unfolding right now in 2026. 00:02:42.870 --> 00:02:44.569 It's a big piece of it. We also need to talk 00:02:44.569 --> 00:02:46.550 about the collapse of the Australian arm just 00:02:46.550 --> 00:02:49.530 last year in 2025, which is a massive red flag 00:02:49.530 --> 00:02:51.250 that I feel like a lot of people in the business 00:02:51.250 --> 00:02:53.250 press are ignoring. Oh, that Australian piece 00:02:53.250 --> 00:02:55.530 is critical. It's the counter narrative to the 00:02:55.530 --> 00:02:58.129 glowing success story we're seeing in the U .S. 00:02:58.659 --> 00:03:01.400 Exactly. But to get there, we have to go back 00:03:01.400 --> 00:03:03.439 to the start. And I was surprised to learn during 00:03:03.439 --> 00:03:05.900 the research for this that the category killer 00:03:05.900 --> 00:03:09.219 of toys, it didn't actually start with toys. 00:03:09.419 --> 00:03:11.580 Not at all. It started with furniture. Right. 00:03:11.680 --> 00:03:14.919 We have to go back to 1948, post -war Washington, 00:03:15.139 --> 00:03:18.979 D .C. A man named Charles Lazarus opens a store. 00:03:20.060 --> 00:03:22.569 But he didn't call it Toys R Us. He calls it 00:03:22.569 --> 00:03:25.530 children's supermark. Children's supermark. It 00:03:25.530 --> 00:03:28.430 sounds very Soviet, very utilitarian. It was. 00:03:28.870 --> 00:03:31.250 Lazarus is a young guy, just 25 years old. He'd 00:03:31.250 --> 00:03:33.349 been a cryptographer during the war. Wow. He 00:03:33.349 --> 00:03:35.849 comes back and he sees all his friends getting 00:03:35.849 --> 00:03:38.490 married, having babies. Yeah. The baby boom is 00:03:38.490 --> 00:03:41.050 just kicking off. He figured logically these 00:03:41.050 --> 00:03:43.930 people need furniture, cribs, high chairs, changing 00:03:43.930 --> 00:03:46.250 tables. That's smart. I mean, follow the demographics, 00:03:46.370 --> 00:03:48.469 simple business plan. Exactly. But he was also 00:03:48.469 --> 00:03:51.030 very observant. he noticed a fundamental flaw 00:03:51.030 --> 00:03:53.569 in the furniture business model almost immediately. 00:03:53.889 --> 00:03:56.050 Which was what? It's a low -frequency transaction. 00:03:56.409 --> 00:03:58.530 You buy a crib for your first kid, maybe you 00:03:58.530 --> 00:04:00.069 reuse it for the second, you don't come back 00:04:00.069 --> 00:04:01.969 next week to buy another crib. Right. It's a 00:04:01.969 --> 00:04:03.969 one -and -done purchase. Unless you're running 00:04:03.969 --> 00:04:06.530 an orphanage, you aren't buying cribs in bulk. 00:04:06.830 --> 00:04:09.229 Exactly. But the parents kept coming in asking 00:04:09.229 --> 00:04:12.370 for, you know, rattles and small toys to keep 00:04:12.370 --> 00:04:14.150 the kids occupied while they looked at the furniture. 00:04:14.409 --> 00:04:18.189 Ah, okay. The add -on sale. And Lazarus realized... 00:04:18.439 --> 00:04:22.279 That unlike a solid oak crib, toys are ephemeral. 00:04:22.399 --> 00:04:25.579 They break. Kids outgrow them. Or the kid just 00:04:25.579 --> 00:04:27.839 gets bored. The replacement cycle. The replacement 00:04:27.839 --> 00:04:31.160 cycle for a toy is weeks or months, not years. 00:04:31.360 --> 00:04:33.759 That is where the recurring revenue was. So he 00:04:33.759 --> 00:04:35.980 pivots. And it wasn't an overnight thing, right? 00:04:36.040 --> 00:04:37.459 It took a while. No, it took about a decade. 00:04:37.600 --> 00:04:41.779 By 1957, he opens the first store dedicated exclusively 00:04:41.779 --> 00:04:45.139 to toys in Rockville, Maryland. And this is where 00:04:45.139 --> 00:04:48.199 the branding genius kicks in. He renames it Toys 00:04:48.199 --> 00:04:50.360 R Us. Let's talk about that branding for a second. 00:04:50.480 --> 00:04:52.879 The backwards R. It drives grammar teachers crazy, 00:04:52.920 --> 00:04:55.540 but it was intentional. Oh, it was genius. Pure 00:04:55.540 --> 00:04:58.439 genius. Lazarus designed it himself. He wanted 00:04:58.439 --> 00:05:00.860 it to look like a semi -literate child had written 00:05:00.860 --> 00:05:03.459 the sign. It was a psychological signal. Totally. 00:05:03.540 --> 00:05:06.300 It told parents, this is a place for your kids. 00:05:06.439 --> 00:05:08.899 And it told kids, this is a place where you are 00:05:08.899 --> 00:05:11.579 in charge. It stripped away the stuffiness of 00:05:11.579 --> 00:05:14.129 the department store. You know, you weren't allowed 00:05:14.129 --> 00:05:17.209 to touch anything. This was your domain. And 00:05:17.209 --> 00:05:19.310 this leads us to the concept of the category 00:05:19.310 --> 00:05:22.050 killer. We hear this term thrown around in business 00:05:22.050 --> 00:05:24.930 school or on CNBC. But what does it actually 00:05:24.930 --> 00:05:28.269 mean in this context? Because Toys R Us was really 00:05:28.269 --> 00:05:30.889 the prototype for this. Right. A category killer 00:05:30.889 --> 00:05:33.009 is a retailer that specializes in one specific 00:05:33.009 --> 00:05:36.350 segment. Toys, electronics, pet supplies and 00:05:36.350 --> 00:05:39.709 stocks. Such a massive depth of inventory that 00:05:39.709 --> 00:05:42.379 generalist stores can't compete. So before Toys 00:05:42.379 --> 00:05:44.680 R Us, where would you even buy a toy? You'd go 00:05:44.680 --> 00:05:46.680 to a local mom and pop shop or maybe the hardware 00:05:46.680 --> 00:05:49.259 store. They had maybe three options for a doll. 00:05:49.439 --> 00:05:53.019 Toys R Us have 300 options. They had entire aisles 00:05:53.019 --> 00:05:55.500 of just dolls. They killed the competition by 00:05:55.500 --> 00:05:58.500 sheer volume and selection. They suck the oxygen 00:05:58.500 --> 00:06:01.339 out of the room. From the 1960s through the 1990s, 00:06:01.339 --> 00:06:03.279 they were the predator. They rolled up the industry. 00:06:03.439 --> 00:06:05.199 They bought competitors like interstate department 00:06:05.199 --> 00:06:08.120 stores in 66. They drove small shops out of business. 00:06:08.360 --> 00:06:11.149 And they just rode these massive culture. ways. 00:06:11.370 --> 00:06:14.670 Oh, yeah. They grew alongside the rise of action 00:06:14.670 --> 00:06:18.589 figures. I mean, Star Wars, G .I. Joe, and then 00:06:18.589 --> 00:06:22.290 the massive video game boom of the 80s with Nintendo 00:06:22.290 --> 00:06:25.050 and Sega. They were perfectly positioned for 00:06:25.050 --> 00:06:27.009 all of it. I think that's important to remember. 00:06:27.170 --> 00:06:29.610 We view them as the victim now because of what 00:06:29.610 --> 00:06:32.430 happened later. But for 40 years, they were the 00:06:32.430 --> 00:06:35.430 bully. Absolutely. They dictated terms to Mattel 00:06:35.430 --> 00:06:38.220 and Hasbro. If Toys R Us didn't carry your toy, 00:06:38.279 --> 00:06:40.540 your toy didn't exist. They were the gatekeepers 00:06:40.540 --> 00:06:42.699 of childhood fun. And they tried to keep evolving, 00:06:42.819 --> 00:06:45.199 right? I saw something about Concept 2000 store. 00:06:45.379 --> 00:06:47.980 Yeah, that was in 1996. They tried to modernize 00:06:47.980 --> 00:06:50.339 with these Concept 2000 stores. The first one 00:06:50.339 --> 00:06:52.620 was in Raritan, New Jersey. Oh, I remember seeing 00:06:52.620 --> 00:06:55.120 pictures of these, the blue facades. Yes, blue 00:06:55.120 --> 00:06:57.519 facades, yellow lined windows. They were trying 00:06:57.519 --> 00:06:59.439 to look modern, trying to get away from that 00:06:59.439 --> 00:07:03.060 warehouse feel. But even as they were doing that, 00:07:03.139 --> 00:07:05.389 the ground was shifting beneath them. And that 00:07:05.389 --> 00:07:08.350 brings us to the beginning of the end, the 2000s. 00:07:08.350 --> 00:07:10.470 And this seems to be where the cracks don't just 00:07:10.470 --> 00:07:13.509 appear, they shatter the foundation. That's a 00:07:13.509 --> 00:07:16.009 good way to put it. We have a new CEO, John Eiler, 00:07:16.069 --> 00:07:19.370 who comes over from FAO Schwartz in 2000. But 00:07:19.370 --> 00:07:21.829 the landscape is changing. Walmart and Target 00:07:21.829 --> 00:07:23.750 are starting to chew away at their market share. 00:07:23.990 --> 00:07:26.589 The 2000s are defined by two things that destroyed 00:07:26.589 --> 00:07:29.480 the category killer model. the rise of the loss 00:07:29.480 --> 00:07:32.300 leader strategy from big box retailers, and of 00:07:32.300 --> 00:07:34.259 course, the rise of the internet. Okay, let's 00:07:34.259 --> 00:07:36.459 start with Walmart and this idea of the loss 00:07:36.459 --> 00:07:38.540 leader. How does that work? Break that down for 00:07:38.540 --> 00:07:42.259 us. A loss leader is when a store sells a product 00:07:42.259 --> 00:07:44.540 at a price lower than what they paid for it. 00:07:44.800 --> 00:07:48.180 They literally lose money on the sale just to 00:07:48.180 --> 00:07:50.040 get a customer into the store. So they're taking 00:07:50.040 --> 00:07:53.129 a hit. On purpose. On purpose. Walmart knew that 00:07:53.129 --> 00:07:55.930 if they sold the hot new Barbie for $10, even 00:07:55.930 --> 00:07:58.829 if it cost them $12 to buy it from Mattel, mom 00:07:58.829 --> 00:08:02.209 would come in, buy the doll, and then spend $200 00:08:02.209 --> 00:08:04.949 on groceries, clothes, and detergent. They made 00:08:04.949 --> 00:08:07.449 their profit on the total basket, not on the 00:08:07.449 --> 00:08:09.850 individual toy. Exactly. And Toys R Us couldn't 00:08:09.850 --> 00:08:11.910 do that. No, because toys were the only thing 00:08:11.910 --> 00:08:14.709 in their basket. Right. If Toys R Us sold the 00:08:14.709 --> 00:08:17.050 Barbie at a loss, they just lost money, period. 00:08:17.290 --> 00:08:19.290 They couldn't make it up on bananas or motor 00:08:19.290 --> 00:08:21.509 oil. They couldn't compete on price anymore. 00:08:21.709 --> 00:08:23.810 Their margins were being compressed to death. 00:08:24.069 --> 00:08:26.230 Okay, so the physical retail war is going badly. 00:08:26.810 --> 00:08:29.009 Then comes the internet, and this is the part 00:08:29.009 --> 00:08:30.990 of the story that always, always frustrates me. 00:08:31.089 --> 00:08:34.049 The deal with the devil. It is painful to look 00:08:34.049 --> 00:08:38.309 back on. It's 1999. E -commerce is exploding. 00:08:38.929 --> 00:08:41.429 Toys R Us tries to launch a website, ToysRUs 00:08:41.429 --> 00:08:45.149 .com, but their logistics, they just implode 00:08:45.149 --> 00:08:46.769 during the Christmas rush. I remember the headlines, 00:08:47.070 --> 00:08:49.429 gifts don't arrive, it's a PR nightmare, parents 00:08:49.429 --> 00:08:51.669 are furious. Beyond furious. So instead of fixing 00:08:51.669 --> 00:08:53.409 it, what do they do? They outsource it. They 00:08:53.409 --> 00:08:56.250 panicked. In 2000, they signed a 10 -year exclusive 00:08:56.250 --> 00:08:59.450 deal with Amazon. A 10 -year deal? 10 years. 00:08:59.549 --> 00:09:02.570 The pitch was, Amazon handles the tech, the website, 00:09:02.669 --> 00:09:04.950 and the shipping. Toys R Us handles the inventory 00:09:04.950 --> 00:09:08.019 and buying. On taper, that sounds? Yeah. Okay. 00:09:08.679 --> 00:09:11.240 You play to your strengths. You're a toy merchant. 00:09:11.419 --> 00:09:13.899 They're a tech company. In the short term, sure, 00:09:14.080 --> 00:09:16.399 it stopped the bleeding. But in the long term, 00:09:16.559 --> 00:09:20.759 it was suicide. By partnering with Amazon, Toys 00:09:20.759 --> 00:09:22.840 R Us stopped learning. What do you mean by that? 00:09:23.210 --> 00:09:24.870 They didn't build their own data centers. They 00:09:24.870 --> 00:09:27.330 didn't develop the algorithms to predict demand. 00:09:27.649 --> 00:09:29.809 They didn't learn how to ship individual packages 00:09:29.809 --> 00:09:32.909 to doorsteps efficiently. They just they handed 00:09:32.909 --> 00:09:35.509 all their customer data and their entire digital 00:09:35.509 --> 00:09:38.090 future to the company that would eventually eat 00:09:38.090 --> 00:09:40.610 their lunch. And then Amazon cheated on them. 00:09:40.730 --> 00:09:43.409 Well, Amazon did what Amazon does. They realized 00:09:43.409 --> 00:09:45.730 they could make more money allowing third party 00:09:45.730 --> 00:09:48.740 sellers to sell toys on the platform, too. They 00:09:48.740 --> 00:09:51.500 breached the exclusivity clause. So Toys R Us 00:09:51.500 --> 00:09:54.559 sued. They sued in 2006. And they actually won. 00:09:54.759 --> 00:09:58.259 They got $51 million in damages in 2009. But 00:09:58.259 --> 00:10:01.059 $51 million is nothing. It's pocket change compared 00:10:01.059 --> 00:10:04.120 to losing a decade of digital innovation. Precisely. 00:10:04.120 --> 00:10:06.120 By the time they got their website back, the 00:10:06.120 --> 00:10:08.200 game was over. They were analog players trying 00:10:08.200 --> 00:10:10.779 to sprint in a digital world. They had lost the 00:10:10.779 --> 00:10:13.220 muscle memory of innovation. But we still haven't 00:10:13.220 --> 00:10:15.720 talked about the actual cause of death. Because 00:10:15.720 --> 00:10:17.799 plenty of companies struggle with Amazon and 00:10:17.799 --> 00:10:20.779 survive. Best Buy is still here. Target is still 00:10:20.779 --> 00:10:24.899 here. Why did Toys R Us actually liquidate? We 00:10:24.899 --> 00:10:27.440 need to talk about the LBO. This is the smoking 00:10:27.440 --> 00:10:30.299 gun. If you take one thing away from this deep 00:10:30.299 --> 00:10:33.820 dive, let it be this. Toys R Us didn't die because 00:10:33.820 --> 00:10:36.220 nobody wanted to buy toys. It died because of 00:10:36.220 --> 00:10:39.379 financial engineering. In 2005. In 2005, the 00:10:39.379 --> 00:10:42.080 company was taken private in a leveraged buyout 00:10:42.080 --> 00:10:44.519 in LBO. Okay, we need to break this down. What 00:10:44.519 --> 00:10:47.279 happened? Who were the players? A group of private 00:10:47.279 --> 00:10:50.500 equity firms, Bain Capital, Kohlberg, Kravis 00:10:50.500 --> 00:10:54.500 Roberts, so KKR, and Varnida Realty Trust. They 00:10:54.500 --> 00:10:57.820 bought the company for $6 .6 billion. Walk us 00:10:57.820 --> 00:11:00.200 through the mechanics of an LBO, because it sounds 00:11:00.200 --> 00:11:02.779 like the investors buy the company like I'd buy 00:11:02.779 --> 00:11:05.179 a car. But that's not really what happens, is 00:11:05.179 --> 00:11:07.120 it? Not with their own money, no. I mean, not 00:11:07.120 --> 00:11:08.899 all of it. Imagine you want to buy a house that 00:11:08.899 --> 00:11:11.200 costs a million dollars. You put down maybe $20 00:11:11.200 --> 00:11:13.240 ,000 of your own cash and you borrow the other 00:11:13.240 --> 00:11:17.700 $980 ,000. But here's the trick. You don't take 00:11:17.700 --> 00:11:19.860 out the loan in your name. You take it out in 00:11:19.860 --> 00:11:22.360 the house's name. The house itself now has to 00:11:22.360 --> 00:11:25.509 pay the mortgage. So Toys R Us, the company, 00:11:25.750 --> 00:11:28.529 was suddenly saddled with the debt used to purchase 00:11:28.529 --> 00:11:31.830 itself. Yes. Overnight, they were loaded with 00:11:31.830 --> 00:11:36.629 over $5 billion in debt. $5 billion. With a B. 00:11:36.970 --> 00:11:38.909 And the service costs, the interest payments 00:11:38.909 --> 00:11:43.570 alone, were roughly $400 million a year. Wait, 00:11:43.570 --> 00:11:47.350 wait. $400 million a year just to pay the interest. 00:11:47.490 --> 00:11:48.970 Just to pay the interest. Right. Before they 00:11:48.970 --> 00:11:50.830 paid a single employee, before they bought a 00:11:50.830 --> 00:11:52.970 single toy from Hasbro, before they paid the 00:11:52.970 --> 00:11:55.110 electric bill or the rent on their stores, they 00:11:55.110 --> 00:11:58.149 had to find $400 million. And this explains so 00:11:58.149 --> 00:12:00.149 much. This explains why the stores started to 00:12:00.149 --> 00:12:02.809 look like dumps in the 2010s. Exactly. You mentioned 00:12:02.809 --> 00:12:06.070 the smell earlier. By 2015, that smell included 00:12:06.070 --> 00:12:08.450 dirty carpets and flickering fluorescent lights. 00:12:08.570 --> 00:12:10.909 Right. They couldn't invest in the customer experience. 00:12:11.330 --> 00:12:13.629 They couldn't renovate. They couldn't build a 00:12:13.629 --> 00:12:16.519 better... website to fight Amazon. Every spare 00:12:16.519 --> 00:12:19.000 dollar, every cent to profit went to the lenders. 00:12:19.200 --> 00:12:22.240 So when people say the retail apocalypse killed 00:12:22.240 --> 00:12:26.080 toys are us, that's lazy analysis. It is. I mean, 00:12:26.080 --> 00:12:30.120 it's not wrong, but it's incomplete. Amazon was 00:12:30.120 --> 00:12:33.059 the storm. The changing retail habits were the 00:12:33.059 --> 00:12:36.240 wind. But the debt was the reason the house collapsed. 00:12:36.480 --> 00:12:38.799 It was the pre -existing condition. Perfectly 00:12:38.799 --> 00:12:41.080 put. If they hadn't had that debt, they might 00:12:41.080 --> 00:12:43.059 have had the agility to pivot. They could have 00:12:43.059 --> 00:12:45.379 invested in prices or smaller, more experiential 00:12:45.379 --> 00:12:47.480 stores. But their hands were tied behind their 00:12:47.480 --> 00:12:50.059 backs. Which brings us to the inevitable crash. 00:12:50.580 --> 00:12:52.820 Section 3 of our outline, the bankruptcy and 00:12:52.820 --> 00:12:56.120 liquidation. It's September 2017. They filed 00:12:56.120 --> 00:12:58.919 for Chapter 11 bankruptcy protection. Now, Chapter 00:12:58.919 --> 00:13:01.419 11 is usually about reorganization. Right. It's 00:13:01.419 --> 00:13:03.019 not supposed to be a death sentence. Exactly. 00:13:03.100 --> 00:13:06.080 The goal wasn't to close. It was to restructure 00:13:06.080 --> 00:13:07.679 that mountain of debt so they could breathe again. 00:13:07.820 --> 00:13:10.700 But the timing was horrific. Why? They filed 00:13:10.700 --> 00:13:12.860 right before the holiday season. The absolute 00:13:12.860 --> 00:13:15.159 worst time for a toy store to look unstable. 00:13:15.259 --> 00:13:18.029 And consumer confidence tanked. It wasn't just 00:13:18.029 --> 00:13:20.549 consumers, it was the suppliers. Companies like 00:13:20.549 --> 00:13:23.190 Mattel, Lego, Hasbro, they got nervous. They 00:13:23.190 --> 00:13:25.450 thought, if I ship a million dollars worth of 00:13:25.450 --> 00:13:28.370 Barbies to Toys R Us, will they be able to pay 00:13:28.370 --> 00:13:30.590 me in January? So they tightened their terms. 00:13:30.789 --> 00:13:33.809 They demanded cash up front or, you know, much 00:13:33.809 --> 00:13:36.269 stricter payment terms. Toys R Us didn't have 00:13:36.269 --> 00:13:38.470 the cash. The whole point of the bankruptcy was 00:13:38.470 --> 00:13:40.580 that they were out of cash. So the shelves were 00:13:40.580 --> 00:13:42.559 empty, or at least thinner than usual, during 00:13:42.559 --> 00:13:45.059 the most important shopping season of the year. 00:13:45.179 --> 00:13:47.820 And the holiday sales were a disaster, a complete 00:13:47.820 --> 00:13:50.259 disaster. They missed their targets by a mile. 00:13:50.299 --> 00:13:53.740 By March 2018, the lenders, who effectively owned 00:13:53.740 --> 00:13:56.139 the company, pulled the plug. They gave up on 00:13:56.139 --> 00:13:57.899 the reorganization. They decided the company 00:13:57.899 --> 00:14:00.559 was worth more dead than alive. Sell off the 00:14:00.559 --> 00:14:02.700 inventory, sell off the real estate, and try 00:14:02.700 --> 00:14:06.029 to recoup some of their losses. I remember the 00:14:06.029 --> 00:14:08.850 photos from that time. The signs that said, everything 00:14:08.850 --> 00:14:11.710 let go. And that heartbreaking picture of Jeffrey 00:14:11.710 --> 00:14:13.809 the giraffe waving goodbye with a suitcase. It 00:14:13.809 --> 00:14:16.590 was genuinely sad. It was brutal. By June 29, 00:14:16.889 --> 00:14:21.950 2018, all 735 U .S. stores were closed. And 33 00:14:21.950 --> 00:14:24.889 ,000 people lost their jobs. And without severance 00:14:24.889 --> 00:14:26.950 pay, right, that was a huge controversy. Right. 00:14:27.029 --> 00:14:29.389 The private equity owners paid themselves millions 00:14:29.389 --> 00:14:32.820 in executive bonuses. But the rank and file employees 00:14:32.820 --> 00:14:34.740 got nothing. We can't gloss over that. It was 00:14:34.740 --> 00:14:36.580 a tragedy for the workforce. These were people 00:14:36.580 --> 00:14:40.000 who had worked there for 20, 30 years. There 00:14:40.000 --> 00:14:42.740 was that brief moment where Party City tried 00:14:42.740 --> 00:14:45.200 to fill the gap with Toy City pop -ups. But yeah, 00:14:45.279 --> 00:14:49.139 it felt like the brand was dead. Except, not 00:14:49.139 --> 00:14:52.080 everywhere. And this is a key plot point for 00:14:52.080 --> 00:14:54.399 where we are today. The Canadian arm survived. 00:14:54.879 --> 00:14:58.179 Yes. This is a fascinating nuance. The Canadian 00:14:58.179 --> 00:15:00.809 division was financially healthier. It wasn't 00:15:00.809 --> 00:15:02.830 dragged down by the exact same debt structure 00:15:02.830 --> 00:15:05.309 in the same way. It was profitable. So while 00:15:05.309 --> 00:15:08.250 the U .S. was liquidating, Canada was OK. More 00:15:08.250 --> 00:15:11.669 than OK. In April 2018, a company called Fairfax 00:15:11.669 --> 00:15:13.929 Financial bought the Canadian division for about 00:15:13.929 --> 00:15:17.450 $234 million. So if you were in Toronto or Vancouver, 00:15:17.970 --> 00:15:20.169 Toys R Us never left. It just kept chugging along. 00:15:20.470 --> 00:15:22.690 Correct. And that's crucial because it kept the 00:15:22.690 --> 00:15:25.629 brand heartbeat alive in North America. It proved 00:15:25.629 --> 00:15:28.070 the store concept itself wasn't broken. The U 00:15:28.070 --> 00:15:30.639 .S. financial structure was. OK, so the U .S. 00:15:30.639 --> 00:15:32.620 operations are dead. We enter what I call the 00:15:32.620 --> 00:15:35.840 zombie years. This is Section 4, 2018 to 2021. 00:15:36.519 --> 00:15:39.440 The lenders decide not to sell the brand name, 00:15:39.539 --> 00:15:41.980 the intellectual property, but to try and revive 00:15:41.980 --> 00:15:44.519 it themselves. It was a very clumsy, very experimental 00:15:44.519 --> 00:15:47.159 period. They realized the brand name and Jeffrey 00:15:47.159 --> 00:15:49.720 still had immense value, so they held on to it. 00:15:49.820 --> 00:15:52.440 And their first move was something called Jeffrey's 00:15:52.440 --> 00:15:56.340 Toy Box. Right. In late 2018. But this wasn't 00:15:56.340 --> 00:15:58.879 a store. No, it was a wholesale concept. You'd 00:15:58.879 --> 00:16:00.919 walk into a Kroger supermarket and there would 00:16:00.919 --> 00:16:04.620 be a cardboard display of... Toys R Us branded 00:16:04.620 --> 00:16:07.259 toys. It felt desperate, honestly, like seeing 00:16:07.259 --> 00:16:10.080 a washed up celebrity doing low budget car insurance 00:16:10.080 --> 00:16:12.379 commercials. It was a way to keep the trademark 00:16:12.379 --> 00:16:14.879 active. In trademark law, you have to use it 00:16:14.879 --> 00:16:17.340 or you lose it. That makes sense. Then in January 00:16:17.340 --> 00:16:20.360 2019, the company emerged from bankruptcy as 00:16:20.360 --> 00:16:23.320 a new entity called True Kids. True Kids. OK. 00:16:23.399 --> 00:16:25.179 And they tried a few things. They relaunched 00:16:25.179 --> 00:16:27.960 the website. But get this. They partnered with 00:16:27.960 --> 00:16:30.580 Target for fulfillment. So you go to ToysRUs 00:16:30.580 --> 00:16:33.940 .com. buy a toy, and a box with red bullseyes 00:16:33.940 --> 00:16:36.080 would show up at your house. Exactly. It was 00:16:36.080 --> 00:16:38.419 so weird. And then in 2020, they switched that 00:16:38.419 --> 00:16:40.779 partnership to Amazon. Back to the X. Oh, my 00:16:40.779 --> 00:16:43.080 God. It was purely a licensing play. But they 00:16:43.080 --> 00:16:45.259 did try to open physical stores, two of them. 00:16:45.379 --> 00:16:48.059 Right. They opened two small concept stores in 00:16:48.059 --> 00:16:51.320 late 2019, one in New Jersey at the Westfield 00:16:51.320 --> 00:16:54.200 Garden State Plaza and one in Houston at the 00:16:54.200 --> 00:16:57.120 Galleria. And these weren't the old giant warehouses. 00:16:57.299 --> 00:17:00.879 No, they were small. 10 ,000 square feet, a fraction 00:17:00.879 --> 00:17:03.440 of the size of the old big boxes. There were 00:17:03.440 --> 00:17:05.740 experiential play areas, little theaters, things 00:17:05.740 --> 00:17:07.460 to do. They were trying to be more interactive. 00:17:07.619 --> 00:17:11.000 And very, very unlucky. The worst timing imaginable. 00:17:11.519 --> 00:17:14.940 They opened in late 2019, three months later. 00:17:15.180 --> 00:17:17.940 COVID -19 sweeps the globe. Malls shut down. 00:17:18.940 --> 00:17:22.019 Retail freezes. Those two concept stores didn't 00:17:22.019 --> 00:17:24.200 stand a chance. They both closed in January 2021. 00:17:24.680 --> 00:17:27.660 So for the second time, Toys R Us is dead in 00:17:27.660 --> 00:17:30.400 the U .S. No physical stores. Just a website 00:17:30.400 --> 00:17:32.319 fulfilled by Amazon. It feels like the end of 00:17:32.319 --> 00:17:34.759 the road. But then the plot twists again. Another 00:17:34.759 --> 00:17:37.480 twist. A new player enters the game. WHP Global. 00:17:38.259 --> 00:17:41.740 In March 2021, this brand management firm acquired 00:17:41.740 --> 00:17:44.380 a controlling interest in True Kids. And this 00:17:44.380 --> 00:17:46.480 is where the strategy shifts from flailing zombie 00:17:46.480 --> 00:17:49.470 to... strategic resurrection. Who are these guys? 00:17:49.589 --> 00:17:51.950 What's their background? WHP Global is backed 00:17:51.950 --> 00:17:53.990 by Oak Tree Capital Management. They're brand 00:17:53.990 --> 00:17:56.390 managers. They own brands like Anne Klein and 00:17:56.390 --> 00:17:59.309 Joseph Abood. Their philosophy is generally asset 00:17:59.309 --> 00:18:01.650 light. What does that mean in this context? It 00:18:01.650 --> 00:18:04.089 means they realized that the value of Toys R 00:18:04.089 --> 00:18:07.869 Us wasn't in signing expensive long -term real 00:18:07.869 --> 00:18:09.910 estate leases and managing thousands of employees. 00:18:10.230 --> 00:18:13.740 The value was in the name, in Jeffrey. In the 00:18:13.740 --> 00:18:16.420 nostalgia. So their first big move wasn't building 00:18:16.420 --> 00:18:18.880 stores. It was the Macy's deal. This was the 00:18:18.880 --> 00:18:21.440 game changer. Absolutely brilliant. In August 00:18:21.440 --> 00:18:24.180 2021, they announced a partnership to put a Toys 00:18:24.180 --> 00:18:26.720 R Us shop inside every Macy's in America. And 00:18:26.720 --> 00:18:28.640 they moved fast. I remember seeing them pop up. 00:18:28.680 --> 00:18:32.039 By October 2022, they were in over 400 Macy's 00:18:32.039 --> 00:18:34.710 locations. It was a genius move. It solved the 00:18:34.710 --> 00:18:36.730 real estate problem instantly. They didn't have 00:18:36.730 --> 00:18:38.970 to sign 400 leases. They didn't have to pay for 00:18:38.970 --> 00:18:41.430 400 electric bills. They used Macy's existing 00:18:41.430 --> 00:18:44.349 foot traffic. And for Macy's, it brought in families 00:18:44.349 --> 00:18:46.529 who maybe hadn't shopped at a department store 00:18:46.529 --> 00:18:49.190 in years. It was a perfect symbiotic relationship. 00:18:49.390 --> 00:18:52.410 For Toys R Us, it put the brand back in front 00:18:52.410 --> 00:18:55.190 of millions of people instantly with very low 00:18:55.190 --> 00:18:57.430 risk. But they didn't stop at the store within 00:18:57.430 --> 00:19:00.250 a store model. They wanted the big flagship experience 00:19:00.250 --> 00:19:05.119 back. And they went big. December 2021, the American 00:19:05.119 --> 00:19:07.539 Dream Mall in New Jersey. The American Dream 00:19:07.539 --> 00:19:10.920 Mall, yeah. 20 ,000 square feet. Two stories. 00:19:11.099 --> 00:19:13.539 They had a slide going between the floors. An 00:19:13.539 --> 00:19:15.440 ice cream parlor. This was a statement piece. 00:19:15.680 --> 00:19:17.299 Absolutely. They were saying, we aren't just 00:19:17.299 --> 00:19:19.279 a section in Macy's. We are still a destination. 00:19:20.180 --> 00:19:23.059 And then fast forward to November 2023, they 00:19:23.059 --> 00:19:25.359 open another massive flagship at the Mall of 00:19:25.359 --> 00:19:27.599 America in Minnesota. Which brings us to the 00:19:27.599 --> 00:19:31.319 modern era. We are talking late 2023 through 00:19:31.319 --> 00:19:35.059 today, February 2026. This is where the strategy 00:19:35.059 --> 00:19:38.019 goes from recovery to what looks like world domination. 00:19:38.460 --> 00:19:40.440 I think that's fair. They call it the air, land 00:19:40.440 --> 00:19:43.099 and sea strategy. It sounds like a military operation, 00:19:43.339 --> 00:19:45.599 doesn't it? But it effectively categorizes their 00:19:45.599 --> 00:19:49.009 expansion. Let's break it down. Air. Air. refers 00:19:49.009 --> 00:19:51.569 to airport stores. They opened the first airport 00:19:51.569 --> 00:19:53.789 store in Dallas -Fort Worth back in November 00:19:53.789 --> 00:19:57.789 2023. It's a smart play. Why? You have a captive 00:19:57.789 --> 00:20:00.690 audience. Parents traveling with bored kids or 00:20:00.690 --> 00:20:03.309 business travelers realizing at the last minute 00:20:03.309 --> 00:20:05.410 they forgot to buy a gift for their child back 00:20:05.410 --> 00:20:08.369 home. High prices, high margins. I walked past 00:20:08.369 --> 00:20:10.730 that one in Terminal A. It's surprisingly well 00:20:10.730 --> 00:20:13.869 stocked for an airport shop. Okay, C. C is cruise 00:20:13.869 --> 00:20:16.150 ships. They started putting branded stores on 00:20:16.150 --> 00:20:19.170 cruise lines. Again, a captive audience. People 00:20:19.170 --> 00:20:21.329 are in a vacation spending mindset. You're already 00:20:21.329 --> 00:20:23.769 spending money. What's another $40 for a Lego 00:20:23.769 --> 00:20:26.309 set? Makes sense. But land is the big gamble. 00:20:26.470 --> 00:20:28.750 Because after saying they were going asset light 00:20:28.750 --> 00:20:31.690 late last year, late 2025, they went heavy again. 00:20:31.809 --> 00:20:34.490 They started building massive standalone flagship 00:20:34.490 --> 00:20:37.190 stores. This is the flagship explosion of 2025. 00:20:37.690 --> 00:20:39.190 This is where the story gets really interesting 00:20:39.190 --> 00:20:42.029 right now. It started slow, but then in September 00:20:42.029 --> 00:20:45.269 2025, they hit the gas pedal. What were the first 00:20:45.269 --> 00:20:49.390 ones? September 20, 2025. They opened in Aurora, 00:20:49.650 --> 00:20:53.650 Illinois at the Chicago Premium Outlets. October 00:20:53.650 --> 00:20:57.880 25, Camarillo, California. November 1. West Des 00:20:57.880 --> 00:21:00.500 Moines, Iowa. Wait, West Des Moines? That's interesting. 00:21:00.599 --> 00:21:02.700 They're not just sticking to the coasts. No, 00:21:02.759 --> 00:21:04.480 they're targeting the heartland. These aren't 00:21:04.480 --> 00:21:06.019 just corners of a department store. These are 00:21:06.019 --> 00:21:08.920 standalone locations. They are betting that the 00:21:08.920 --> 00:21:11.099 experience of the toy store is back in demand. 00:21:11.359 --> 00:21:13.440 And the openings kept coming. Oh, yeah. Through 00:21:13.440 --> 00:21:16.480 the holiday season of 2025, they opened in Maryland, 00:21:16.759 --> 00:21:21.380 Nebraska, Colorado, New York, Kansas. I mean, 00:21:21.380 --> 00:21:23.019 they were cutting ribbons almost every week. 00:21:23.369 --> 00:21:25.430 And we can't ignore the international push either. 00:21:25.529 --> 00:21:27.470 I feel like we only focus on the U .S., but they 00:21:27.470 --> 00:21:29.529 have been aggressive in Latin America. Very aggressive. 00:21:29.670 --> 00:21:32.750 They opened in Mexico in late 2023 via partnership 00:21:32.750 --> 00:21:34.829 with Liverpool, the department store chain there. 00:21:35.089 --> 00:21:38.109 But the real push was late 2025 in South America. 00:21:38.210 --> 00:21:39.710 Where would they go? They opened the first store 00:21:39.710 --> 00:21:43.470 in Chile in November 2025 in Santiago and then 00:21:43.470 --> 00:21:45.910 Peru just a couple of weeks later in Lima. So 00:21:45.910 --> 00:21:48.829 if you look at the map right now in 2026, Toys 00:21:48.829 --> 00:21:52.269 R Us is growing on three continents. It's in 00:21:52.269 --> 00:21:55.250 airports. It's on boats. It's in Macy's. It's 00:21:55.250 --> 00:21:57.990 opening standalone stores. It looks like a massive, 00:21:58.089 --> 00:22:00.450 undeniable success story. It certainly looks 00:22:00.450 --> 00:22:02.109 that way. The press releases are glowing. The 00:22:02.109 --> 00:22:04.789 pictures are great. But. I hear a but coming. 00:22:04.970 --> 00:22:07.549 A big one. We have to talk about Australia. The 00:22:07.549 --> 00:22:10.769 warning sign. The canary in the coal mine. We 00:22:10.769 --> 00:22:13.539 cannot ignore what happened in Australia. While 00:22:13.539 --> 00:22:15.880 the U .S. was popping champagne and cutting ribbons 00:22:15.880 --> 00:22:19.720 in late 2025, the Australian arm of Toys R Us 00:22:19.720 --> 00:22:22.980 collapsed again. Talk us through that timeline. 00:22:23.059 --> 00:22:25.480 This is recent history. So the Australian arm 00:22:25.480 --> 00:22:27.359 had also been revived after the initial bankruptcy. 00:22:27.940 --> 00:22:30.200 It was even listed on the ASX, the Australian 00:22:30.200 --> 00:22:32.720 Stock Exchange. It seemed like it was stabilizing. 00:22:32.799 --> 00:22:35.700 But it wasn't. But on June 5, 2025, less than 00:22:35.700 --> 00:22:38.279 a year ago. It went into voluntary administration. 00:22:38.559 --> 00:22:41.299 It's their version of bankruptcy. Why? What went 00:22:41.299 --> 00:22:43.279 wrong there that's supposedly going right here? 00:22:43.519 --> 00:22:46.839 The same old demons. Tight margins. Inflation 00:22:46.839 --> 00:22:49.000 affecting consumer spending. High supply chain 00:22:49.000 --> 00:22:51.819 costs. He was just losing money hand over fist. 00:22:52.500 --> 00:22:55.799 By July 2025, it was taken over by a company 00:22:55.799 --> 00:22:58.880 called Directed Electronics Australia and delisted 00:22:58.880 --> 00:23:01.680 from the stock exchange. So literally seven years 00:23:01.680 --> 00:23:04.160 after the initial bankruptcy, it failed again 00:23:04.160 --> 00:23:07.089 in a major Western market. It serves as a potent 00:23:07.089 --> 00:23:11.009 reminder. The brand name Toys R Us is not a magic 00:23:11.009 --> 00:23:13.190 shield. It doesn't protect you from fundamental 00:23:13.190 --> 00:23:15.650 economics. That's a huge point. The retail market 00:23:15.650 --> 00:23:18.309 is still brutal. Inflation is still real. So 00:23:18.309 --> 00:23:20.730 while we celebrate the U .S. expansion, the Australian 00:23:20.730 --> 00:23:24.309 failure sits there as a reminder that back doesn't 00:23:24.309 --> 00:23:26.960 necessarily mean safe. That is a sobering thought. 00:23:27.019 --> 00:23:28.640 Just because you have a gleaming new flagship 00:23:28.640 --> 00:23:30.400 in Des Moines doesn't mean you're printing money. 00:23:30.579 --> 00:23:33.200 Exactly. Rent is expensive. Staffing is expensive. 00:23:33.339 --> 00:23:35.759 If the economy takes a dip or if another hot 00:23:35.759 --> 00:23:38.220 trend emerges online, those standalone stores 00:23:38.220 --> 00:23:40.660 are very vulnerable. Let's pivot to something 00:23:40.660 --> 00:23:42.380 a little lighter before we wrap up. Let's talk 00:23:42.380 --> 00:23:44.000 about the culture, because you can't talk about 00:23:44.000 --> 00:23:46.299 Toys R Us without Jeffrey. The spokes animal. 00:23:46.359 --> 00:23:48.950 He's an icon. You know, he started as Dr. G. 00:23:49.029 --> 00:23:51.869 Raff in the 1950s. Dr. G. Raff? That sounds like 00:23:51.869 --> 00:23:55.190 a bootleg serial mascot. Or a very questionable 00:23:55.190 --> 00:23:58.650 pediatrician. I know, right? He evolved. He became 00:23:58.650 --> 00:24:01.589 the Jeffrey we know in the 70s. But do you remember 00:24:01.589 --> 00:24:04.089 April the Giraffe? Oh, the viral livestream. 00:24:04.410 --> 00:24:08.359 2017. The whole world was watching this pregnant 00:24:08.359 --> 00:24:10.880 giraffe give birth at a zoo in New York. The 00:24:10.880 --> 00:24:13.599 whole world. And Toys R Us sponsored it. It was 00:24:13.599 --> 00:24:15.859 this massive viral marketing win for them right 00:24:15.859 --> 00:24:18.079 before the bankruptcy. It was a high point. It 00:24:18.079 --> 00:24:20.019 showed that the brand still had immense cultural 00:24:20.019 --> 00:24:22.559 relevance. People loved the connection. And speaking 00:24:22.559 --> 00:24:25.359 of comebacks, it's not just the toy store. Babies 00:24:25.359 --> 00:24:28.390 R Us is pulling a Lazarus, too. Yes. They opened 00:24:28.390 --> 00:24:30.470 a flagship at the American Dream Mall in July 00:24:30.470 --> 00:24:33.809 of 2023. But the big news was the Kohl's deal. 00:24:33.970 --> 00:24:36.430 Right. Announced in May 2024. They opened 200 00:24:36.430 --> 00:24:38.930 Baby Czar shops inside Kohl's stores. It's a 00:24:38.930 --> 00:24:41.430 Macy's playbook all over again. Exactly. Partner 00:24:41.430 --> 00:24:43.450 with an existing department store, reduce overhead, 00:24:43.630 --> 00:24:45.890 leverage the brand. It's a smart way to capture 00:24:45.890 --> 00:24:48.210 the baby market without the risk of owning massive 00:24:48.210 --> 00:24:50.190 expensive real estate. And I have to mention 00:24:50.190 --> 00:24:52.880 the movies. This is one of my favorite. Weird 00:24:52.880 --> 00:24:55.319 facts from the research. Did you know the movie 00:24:55.319 --> 00:24:58.660 Spirit Halloween from 2022 was filmed inside 00:24:58.660 --> 00:25:02.599 an abandoned Toys R Us? That is the most meta 00:25:02.599 --> 00:25:05.420 thing I've ever heard. A movie about a pop -up 00:25:05.420 --> 00:25:07.619 store that takes over abandoned retail spaces 00:25:07.619 --> 00:25:10.799 filmed in the abandoned carcass of the very store 00:25:10.799 --> 00:25:13.220 that Spirit Halloween usually takes over. It's 00:25:13.220 --> 00:25:16.420 retail inception. It's the circle of life. Or 00:25:16.420 --> 00:25:19.079 the circle of retail death. It's perfect. And 00:25:19.079 --> 00:25:21.279 we've got a new movie coming, right? An actual 00:25:21.279 --> 00:25:24.720 Toys R Us movie announced back in April 2025. 00:25:25.160 --> 00:25:27.279 Yes, produced by a company called Story Kitchen 00:25:27.279 --> 00:25:29.920 and Toys R Us Studios. They have a studio now. 00:25:30.059 --> 00:25:32.140 Apparently. They were trying to turn the IP into 00:25:32.140 --> 00:25:34.720 a media franchise. Barbie did it. Lego did it. 00:25:34.779 --> 00:25:36.720 They look at those billions of dollars and think, 00:25:36.799 --> 00:25:39.480 why not Jeffrey? I'd watch a Jeffrey the Giraffe 00:25:39.480 --> 00:25:42.700 origin story. Maybe a gritty reboot where Dr. 00:25:42.960 --> 00:25:45.519 G. Raff loses his medical license and turns to 00:25:45.519 --> 00:25:47.880 selling toys to pay off his student loans. Let's 00:25:47.880 --> 00:25:50.640 not give them any ideas. But it speaks to the 00:25:50.640 --> 00:25:53.819 strategy. They aren't just selling plastic. They 00:25:53.819 --> 00:25:57.019 are selling a character, an experience. If kids 00:25:57.019 --> 00:25:59.140 love the character, maybe the price of the toy 00:25:59.140 --> 00:26:01.039 matters less. Okay, let's bring it all home. 00:26:01.099 --> 00:26:03.420 Let's synthesize this. We've gone from the furniture 00:26:03.420 --> 00:26:06.440 store in 1948 to the category killer, to the 00:26:06.440 --> 00:26:09.119 debt -ridden giant, to the grave, and now to 00:26:09.119 --> 00:26:12.000 this massive multi -platform resurrection in 00:26:12.000 --> 00:26:15.160 2026. It's a story of financial engineering gone 00:26:15.160 --> 00:26:17.339 wrong, and then perhaps financial engineering 00:26:17.339 --> 00:26:20.339 gone right. The LBO in 2005 saddled them with 00:26:20.339 --> 00:26:23.019 debt that made them unable to compete. The liquidation 00:26:23.019 --> 00:26:25.400 wiped that debt slate clean. A hard reset. A 00:26:25.400 --> 00:26:28.519 very hard reset. And the new ownership, WHP Global, 00:26:28.799 --> 00:26:31.500 has been very clever about asset -light expansion 00:26:31.500 --> 00:26:34.039 partnerships with Macy's, Kohl's, cruise ships. 00:26:34.279 --> 00:26:36.420 They aren't trying to rebuild the empire of 1990 00:26:36.420 --> 00:26:38.599 exactly as it was. They are building a modern, 00:26:38.680 --> 00:26:40.640 more diversified version of it. But the question 00:26:40.640 --> 00:26:43.400 remains. We are standing here in early 2026. 00:26:43.519 --> 00:26:45.579 There are gleaming new stores in Iowa and California. 00:26:45.960 --> 00:26:49.190 Is it sustainable? That is the billion dollar 00:26:49.190 --> 00:26:51.869 question. We are seeing a swing back to physical 00:26:51.869 --> 00:26:55.150 retail. I think people miss the experience during 00:26:55.150 --> 00:26:57.549 the pandemic. They miss the smell of the story 00:26:57.549 --> 00:26:59.130 you talked about at the top. I think so, too. 00:26:59.450 --> 00:27:02.309 E -Congress is great for efficiency, but it's 00:27:02.309 --> 00:27:06.009 terrible for discovery and wonder. Toys R Us 00:27:06.009 --> 00:27:07.970 is betting that the wonder is worth the rent. 00:27:08.150 --> 00:27:10.430 But with the Australia collapse in the rearview 00:27:10.430 --> 00:27:12.950 mirror, we know the ice is thin. The debt is 00:27:12.950 --> 00:27:16.710 gone, but the competition isn't. Amazon is still 00:27:16.710 --> 00:27:20.210 Amazon. Walmart is still Walmart. Target is still 00:27:20.210 --> 00:27:23.049 Target. Toys R Us has to offer an experience 00:27:23.049 --> 00:27:25.690 that is worth the trip, worth the higher prices. 00:27:26.240 --> 00:27:28.420 If they become just a warehouse with shelves 00:27:28.420 --> 00:27:30.900 again, they will fail again. They need the magic. 00:27:31.240 --> 00:27:33.720 So here is my final provocative thought for you 00:27:33.720 --> 00:27:36.599 listening today. Next time you are in Macy's 00:27:36.599 --> 00:27:38.900 or you see one of these new standalone Toys R 00:27:38.900 --> 00:27:41.240 Us stores, walk in. Don't just look at the toys. 00:27:41.339 --> 00:27:42.960 Look at the business. Look at the foot traffic. 00:27:43.119 --> 00:27:45.500 Look at the prices on the shelves. Are they successfully 00:27:45.500 --> 00:27:48.140 selling a product or are they successfully selling 00:27:48.140 --> 00:27:51.500 a memory? And ask yourself, is the memory worth 00:27:51.500 --> 00:27:54.470 the markup? because that is what they are banking 00:27:54.470 --> 00:27:57.650 on. That nostalgia has a price tag. Ooh, that's 00:27:57.650 --> 00:28:01.210 cynical, but accurate. That's it for this deep 00:28:01.210 --> 00:28:03.069 dive into the resurrection of Toys R Us. We'll 00:28:03.069 --> 00:28:04.930 catch you on the next one. Stay curious, watch 00:28:04.930 --> 00:28:07.029 your margins, and maybe go buy a Lego set for 00:28:07.029 --> 00:28:09.130 yourself. You've earned it. Goodbye, everyone.