The ongoing Toys “R” Us saga appears to be coming to a close. The toy superstore chain announced in U.S. Bankruptcy Court that it must liquidate, meaning that it is incredibly likely that it will be closing the doors for all of its stores and selling off the remainder of its merchandise.
Originally, Toys “R” Us was hoping to keep about 400 stores open. However, the firm does not have the cash to maintain that footprint and the cash burn would be too significant.
Accordingly, the firm is projected to run out of cash by May 2018. Also, it was said in the bankruptcy filing that Toys “R” Us has enough money left to pay its 33,000 workers for “no fewer than 60 days.”
So who does this affect the most, besides young children?
Hasbro Inc. (NASDAQ: HAS) and Mattel Inc. (NASDAQ: MAT) will be feeling the heat from this as they are some of the biggest toymakers in the United States, if not the world.
On the other hand, Walmart Inc. (NASDAQ: WMT) stands to gain from this departure of Toys “R” Us. The superstore operator has toy sections across thousands of stores and a huge online section as well. That is to say, Walmart would benefit from a disaster at almost any other large retail business. It has over 3,500 supercenters in the United States that are the company’s flagship locations. These stores employ over a million people nationwide. Walmart U.S. had sales of $315 billion last year.
Toys “R” Us had a very modest online presence, which is trouble for any midsized national retailer. None can match the massive traffic to either Walmart’s website, or its primary competition Amazon.com Inc. (NASDAQ: AMZN), which also has an almost endless toy collection.
What made Toys “R” Us special was the fact that it was more or less a giant playground of a store. While kids may be on the internet more than ever these days, shopping for toys online will not be the same as experiencing the tactile pleasure of running into a giant playhouse of toys.
Shares of Hasbro were last seen down 0.9% at $87.73, with a consensus analyst price target of $107.71 and a 52-week trading range of $87.51 to $116.20.
Mattel shares were traded down 2.5% at $13.82, with a consensus price target of $16.04 and a 52-week range of $12.71 to $25.97.
Walmart was last seen up 0.9% at $88.46 per share. The stock has a 52-week range of $69.33 to $109.98 and a consensus price target of $105.01.
And Amazon was trading down 0.1% at $1,588.93. Its consensus price target is $1,669.41, and the 52-week range is $833.50 to $1,617.54.