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Maker Of Bratz And Little Tikes Seeks To Save Toys R Us

Apr 10, 2018
Originally published on April 13, 2018 9:20 am

Toys R Us is going out of business, its website is shuttered, its gift cards will expire soon, and some of its store locations are on the auction block.

But one businessman is determined to bring the bankrupt toy store franchise back to life.

"I will make Toys R Us a fun place again," toy mogul Isaac Larian tells NPR's Rachel Martin.

To do that, Larian is raising money through a GoFundMe campaign. Larian is the CEO of MGA Entertainment — and launched last year's breakout toy hit, L.O.L. Surprise, as well as the Bratz line of dolls and Little Tikes, all of which are sold in Toys R Us stores.

The campaign itself relies on nostalgic appeal for a childhood icon — one that spans generations and includes a catchy commercial jingle. "You can be a part of this historic movement to #SaveToysRUs by donating today!" the campaign page says. "Your donation will help to ensure that generations to come can 'always be a Toys R Us kid' and save employee jobs that are at stake should the company cease operation."

So far, the #SaveToysRUs campaign to raise $1 billion has brought in a little over $2oo million — though most of that is a pledge from Larian and other big investors. The rest is from people making smaller donations in return for stickers and toys. (According to the campaign, if the goal is not met by May 28 and the donations are not used to buy Toys R Us, the money will be returned.)

Toys R Us announced last month that it would go out of business, telling its more than 30,000 employees (including those at Babies R Us) that it would sell or close all of its U.S. stores. The chain's problem, as described by NPR's Alina Selyukh, has been managing its debt:

Toys R Us has struggled with a heavy load of debt inherited from a 2005 buyout, as well as intense competition from Walmart, Amazon and Target — made worse by disappointing holiday sales.

The chain — whose history traces back to a post-World War II baby furniture store — has spent many decades as the country's largest dedicated toy emporium. In 2017, Toys R Us accounted for roughly one-fifth of toy sales in the U.S., according to Jefferies analyst Stephanie Wissink.

But in recent years, Toys R Us has found itself amid a trifecta of demographic and social changes, Wissink says.

Today's parents are the millennial generation who grew up with the Internet and approach purchasing decisions and time they spend with children differently from baby boomers. Generally, foot traffic is falling at brick-and-mortar stores. And children are playing differently than they used to decades ago.

Larian says if he is able to buy it, he plans to reinvest in the company in ways the chain has been unable to because of the debt — though he would likely keep only about 150 to 200 of its 735 U.S. stores.

As for his imagined revamp, he won't give details. "We are still competing to buy Toys R Us, and I don't want other people to know what we plan to do," he says. "It's not going to be a minor thing. It's going to be a major thing."

Other potential buyers, he says, would simply flip the company, and if that happens, "Toys R Us is not going to last. It needs a crazy person who lives, breathes and eats toys like I do."

Morning Edition's Vince Pearson and Jessica Smith produced and edited this story for broadcast.

Copyright 2018 NPR. To see more, visit http://www.npr.org/.

RACHEL MARTIN, HOST:

Toys R Us is liquidating and closing stores after declaring bankruptcy last year. This is bad news for toymakers who still sell a lot of their toys at brick-and-mortar stores. Now, one big toymaker is trying to save Toys R Us. His name is Isaac Larian, and he is the CEO of MGA Entertainment. It's the company behind popular brands like Bratz and Little Tikes toys. Larian is trying to raise a billion dollars to buy Toys R Us, and he even has a crowdfunding campaign online. I talked to him recently about his plan.

Hey, Mr. Larian, thanks for being with us.

ISAAC LARIAN: Thanks, Rachel. Good morning.

MARTIN: There is a reason Toys R Us is going out of business, right? They couldn't get a restructuring plan. Investors didn't want to save it, presumably, because it's not a good investment. Why do you think otherwise?

LARIAN: Rachel, I think what happened with Toys R Us unfortunately is that the private equities bought that company, put a ton of loan on it with interest payments and fees, et cetera. So they didn't have the money to reinvest in the stores and grow it. That is why Toys R Us failed.

MARTIN: All right, so you say it was just mismanaged, but explain why this store is important to you.

LARIAN: Toys R Us is the only toy retailer that you can go in and find all kind of toys in there. Other retailers do not have the room and the space to do that. And as a result, many, many smaller toy companies, including MGA - at one time, we launched our key products at Toys R Us.

MARTIN: So you're hoping to raise a billion dollars.

LARIAN: Yes.

MARTIN: How much have you raised online so far?

LARIAN: Well, we have already raised over $200 million; $100 million of that is mine. But frankly if the GoFund campaign doesn't go as we expected, we have already investors lined up and financing lined up on the side to be able to do that. Unfortunately, Rachel, we are not going to save all 732 stores. Probably we will save in USA about 150 to 200 stores, and we will build and grow from there. But if Toys R Us goes out of business, the toy business as a whole will change forever.

MARTIN: Let me ask you - many say it already has, and you talk about if you're able to get this money and keep Toys R Us, you will restructure how the company is run. But do you have any other ideas for how to position the company to be successful in the future? I mean, is there something about the branding or the marketing or the stores themselves?

LARIAN: I will make Toys R Us a fun place again.

MARTIN: Like, can you just give me a couple examples?

LARIAN: I can't. I don't want to do that because we are still competing to buy Toys R Us, and I don't want other people to know what we have, what we plan to do.

MARTIN: You're saying something will change about the experience.

LARIAN: Absolutely. And it's not going to be a minor thing. It's going to be a major thing.

MARTIN: Right. And just to clarify, did you say that there is competition?

LARIAN: I hear there are a lot of financial companies, private equity, et cetera, trying to buy it cheap, flip it and make a few extra dollars. Frankly, I think if another private equity or a financial company buys Toys R Us, Toys R Us is not going to last.

MARTIN: You think it needs to be a toy person, and that's you.

LARIAN: Absolutely - needs a crazy person who lives, breathes and eats toys like I do (laughter) to do it.

MARTIN: (Laughter) Isaac Larian is CEO of MGA Entertainment, and he is leading an effort to save Toys R Us. Mr. Larian, thank you so much for your time.

LARIAN: Thank you, Rachel.

(SOUNDBITE OF BEASTIE BOYS SONG, "B FOR MY NAME") Transcript provided by NPR, Copyright NPR.