In this segment from the Motley Fool Money radio show, host Chris Hill, Million Dollar Portfolio‘s Jason Moser, Total Income‘s Ron Gross, and Motley Fool Pro and Options‘ Jeff Fischer consider the decline and fall of that icon of childhood, Toys R Us. And while it’s true that kids are losing interest in toys faster as electronic devices capture their attention earlier, and also true that Amazon.com (NASDAQ:AMZN) and its ilk are soaking up sales, what really put this company into the penalty box was the choice by its private-equity owners to lard it down with debt.
A full transcript follows the video.
This video was recorded on Sept. 22, 2017.
Chris Hill: Retail news this week that may not have been surprising but was still a little bit jarring: Toys R Us filed for Chapter 11 bankruptcy protection. CEO Dave Brandon says the stores will still be open through the holidays. They’ve just got too much debt, Jason.
Jason Moser: It feels like they’re taking a little bit of our childhood away from us.
Hill: That’s what I’m saying! It kind of hit me on a gut level.
Moser: It’s a bit sentimental, I guess. I mean, listen, there are a lot of takeaways on this. But ultimately, in the end, when you have a company that is devoting a lot of financial resources to a questionable strategy, and they just keep on growing that debt, I mean, it’s really difficult to overcome that in the face of a market that’s changing very quickly. Not only the proliferation of e-commerce, but really, we think about how toys have become something different today. The definition of a toy is much different today than it was when we were growing up. There’s a much smaller window there for kids before they start graduating to those devices.
You’re right — Toys R Us is not going away. Wall Street banks are out there providing some lending there. And I think a lot of that is based on the perceived value of some real estate out…