New Toys ‘R’ Us Owners Mull Physical Stores Next Year

(Bloomberg) -- The hedge funds that now own the Toys “R” Us brand plan to relaunch the toy retailer as a standalone operation next year, according to people familiar with the matter.

Solus Alternative Asset Management and Angelo Gordon will look to raise capital to help revive the chain, which closed its last stores at the end of June, and are making plans that include brick-and-mortar locations, the people said.

Before opening their own establishments, the funds are partnering with Kroger Co., the largest grocery store operator in the U.S., to create pop-up sections named Geoffrey’s Toy Box in about 600 stores. The areas inside the supermarkets will appear starting this month, selling a selection of toys from brands like Imaginarium and Journey Girls, Kroger said in a statement Friday.

The bigger plan is still in the works, the people said, and could change depending on various factors including financing. Representatives for Angelo Gordon and Solus Alternative Asset Management did not comment.

Rebuilding the Toys “R” Us brand remains a daunting task, especially since the chain’s leases and distribution centers were sold in the liquidation. While a few retailers have found a second life after liquidating, it’s usually been online only or as a section in another store.

Plan B

Solus and its cohorts didn’t set out to be merchants. The lenders assumed control of the Toys “R” Us and Babies “R” Us brands because the intellectual property served as collateral on their loans, which the troubled retailer defaulted on after filing for bankruptcy. The funds initially put the IP rights up for auction, but canceled the sale, arguing that holding on to them was better than the offers it received.

The process, however, prevented them from formulating a plan in time for the critical holiday shopping season. Many toy vendors now say they’ve simply moved on.

The plans for a relaunch of the brand, first reported by Bloomberg last month, don’t sit well with former workers, who blame the funds for the company’s liquidation and the loss of 33,000 jobs.

“I’m just sick over this,” said Cheryl Claude, a former assistant store manager who traveled from New Jersey to protest last month outside the Manhattan offices of Solus and Angelo Gordon.

It’s not just the workers that have been hurt by the company’s absence. Hasbro Inc. said on its October earnings call that the impact of the retailer’s demise could persist for a few quarters. Mattel Inc. has also been hurt by the liquidation of its biggest customer.

To contact the reporters on this story: Eliza Ronalds-Hannon in New York at eronaldshann@bloomberg.net;Lauren Coleman-Lochner in New York at llochner@bloomberg.net;Matthew Boyle in New York at mboyle20@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, ;Shannon D. Harrington at sharrington6@bloomberg.net, Jonathan Roeder

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