Toys 'R' Us and the Death of Retail

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When Debbie Beard found out the company she'd worked at for 29 years, Toys R Us, was closing down, she was shocked--she knew the company had been having financial difficulties for a while, but didn't realize it was that bad. The more she learned, though, about the way the company had been looted by private equity firms Bain Capital and KKR, the more she determined that no one else should have to go through this. Debbie and other Toys R Us workers are organizing to demand severance pay from the company, and beyond that, organizing to stop the kind of leveraged buyouts that saddle viable companies with unsustainable debt. She joins  me along with Carrie Gleason of the Fair Workweek Initiative at the Center for Popular Democracy to explain what can be done.

Outtakes:

CG: This has been going on for quite some time, and during the recession, about ten years ago now, retail companies started to turn to these private equity firms to help them with their financial struggles. Many retail companies were bought out through this process called a leveraged buyout.

In the case of Toys R Us, what happened was in say 2005 the company only had 30% debt. Then, as soon as KKR and Bain Capital bought it out, that flipped and the company went to 70% debt and only 30% equity. The company had long paid back this debt, but then, as every year, they had to pay management fees and other kinds of, basically, fees to take care of Bain Capital from one year to the next, on top of interest, and it became financially unviable.

Then, Amazon gets on the scene and all of these investors across all of these retail companies look at what is happening with Amazon. Last year, it became the second largest retail company in America. They thought, “Well, maybe we should get out now, it is going to take too much investment, capital investment, to make this company competitive. So let’s just close the doors.”

The truth is that Toys R Us is a completely viable business. Many of these other retail companies that are closing doors, like Nine West, are completely viable businesses, but the problem is that the owners aren’t looking to run the business of retail. It is a big problem. Then, it is not just this private equity ownership. Big companies like Macy’s and Kohl’s have other kinds of debt that are really crippling them in this moment where they actually need to be changing their strategies for the new retail industry that is emerging.

As a result, I will say, a lot of people are losing their jobs. A lot of hard-working women like Debbie are losing their jobs. And, this is a disaster, a financial crisis that could completely be avoided if we just regulate these Wall Street firms.

DB: There are several single moms in my store. I get emotional about this. I am sorry. I have got a mom, Melissa, she has got three young boys under six trying to make a living because she is a single mom. Julie has a specific schedule because she is taking care of her mom. It is going to upset their whole lives. Julie, as a matter of fact, has been with this store for twenty-one years. She opened this store and now she is going to close it.

Interviews for Resistance is a syndicated series of interviews with organizers, agitators and troublemakers, available twice weekly as text and podcast.