Toys "R" Us Reveals Cause Of Bankruptcy

While there are multiple causes to blame for Toys "R" Us' problems, the company revealed that they think the problems lie with lack of one important category of customer.

In their most recent annual filing, Toys "R" Us says some of the issues with the retail chain reside in the fact that the birth rates in countries where they operate are substantially lower, and that greatly affects their bottom line (via Business Insider).

"Most of our end-customers are newborns and children and, as a result, our revenues are dependent on the birth rates in countries where we operate," the filing reads. "In recent years, many countries' birth rates have dropped or stagnated as their population ages, and education and income levels increase. A continued and significant decline in the number of newborns and children in these countries could have a material adverse effect on our operating results."

It is true that US births have declined since 2007, while the average life expectancy has continued to stay around 78 years. That combination is looked at by some as an issue, as it means less young people are part of the economy and theoretically hinders stores like Toys "R" Us. In fact, US births hit a record low in 2016, with the current ration at 62 births per 1,000 women.

As others have pointed out though, while that might be a factor, it is probably not the sole reason. Much of the chain's issues came from the heavy debt burden it was shouldered with after being purchased by KKR, Bain Capital, and Vornado. They purchased it at $6.6 billion but turned $5.3 billion of that into debt. Since then Toys "R" Us has been digging itself out of a whole with large interest payments, and while they were struggling they also fell behind other retailers, both of the brick and mortar variety and online variety.

Now they are closing all of their stores in the U.S., though hopefully some of the employees laid off will be able to find jobs at the newly resurfaced KB Toys.