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Offbeat The curse that sank Toys R Us is now haunting J.Crew

19:34  03 july  2018
19:34  03 july  2018 Source:   businessinsider.com

Friday is your last day to be a Toys R Us kid

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The Sodden, Sunken , and Drowned Crew are bosses which appear in the Cove. The Crew are a group of three undead smugglers chained to the wrecked ship aboard which they drowned, typically alongside a Drowned Anchorman that they can summon repeatedly in battle.

The Toys ‘ R ’ Us in Sunnyvale is haunted by a man named Johnson, employees and psychics say. So, now the obvious question: Is it all just a desperate sales gimmick? “It’s very good publicity for us ,” said store director Stephanie Lewis.

J.Crew is in danger of falling victim to a curse that has been haunting retail for years.

Though falling sales have plagued the chain for years, its biggest problem doesn't seem to have anything to do with an inability to keep up with the latest trends.

It's actually the millions of dollars in debt the retailer has carried since 2011, when TPG Capital and Leonard Green & Partners helped it buy itself through a $3 billion leveraged buyout, taking the company private.

J.Crew now has around $1.7 billion in debt, which it is paying in quarterly payments, the Washington Post reported.

"There are so many issues here, but the biggest one is a crippling debt load — we're talking $30 million a quarter just in interest payments," Neil Saunders, managing director of GlobalData Retail, told the Washington Post. "It's an eye-watering number and it makes a turnaround just about impossible."

Former Toys R Us CEO works to reboot the retailer

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But there’s one particular story, true or not, that always comes to mind when I hear about this sort of thing: The haunted Toys “ R ” Us of Sunnyvale, California. It just so happens that the old farmland is now home to a modern-day Toys “ R ” Us .

J.Crew has been making progress on at least some of its debt. It was up to more than $2 billion as of a year ago, but the company successfully negotiated a deal to restructure the most pressing obligation: $567 million in bonds that would have come due in 2019. The amount due is now cut in half and it has two extra years, until 2021, to boost its sales and pay off the amount.

The long-term debt, however, will continue to haunt the brand as it tries to turn its business around with an ambitious, but still detail-scarce, "relaunch" slated for later this year. A J.Crew spokesperson did not immediately return Business Insider's request for comment on the relaunch plan.

It's a familiar story

Toys R Us is a cautionary tale for J.Crew. It, too, was left with a large amount of debt as a result of a leveraged buyout.  

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The Toys R Us in Sunnyvale, infamous for its ghostly haunting . Visitors and crew at the now -museum report mysterious moving objects, ghosts of sailors wandering the ship, and other paranormal activity. less.

So what Captain Barbossa did, he strapped a cannon to Bootstrap's bootstraps and the last we saw, he was sinking to the crushing black oblivion of Davy Jones's Locker. And so the now - cursed crew attempted to reclaim all 882 pieces of the Aztec gold, in order to lift their curse .

Bain Capital, Kohlberg Kravis Roberts, and Vornado Realty Trust together invested $1.3 billion in a $6.6 billion leveraged buyout in 2005, taking Toys R Us private.

This saddled Toys R Us with over $5 billion worth of debt that the company could never shake. According to a bankruptcy filing, Toys R Us was still making $400 million payments on its debt each year.

"In Toys' case, high leverage remaining from the 2005 leveraged buyout reduced financial flexibility, which in turn limited investment, leading to the erosion of the company's competitive position at a time when its primary competitors such as Walmart, Amazon, and Target were running on all cylinders," said Charlie O'Shea, a Moody's analyst.

The retail landscape was shifting underneath Toys R Us' feet, and the combination of increased competition and lack of maneuverability helped lead to its ultimate demise and liquidation.

A similar thing happened with Nine West, Payless, True Religion, and Gymboree just in the last few years.


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