When the last Toys ‘R’ Us store closes its doors once and for all, the company’s top executives will have pocketed some $8.2 million in retention bonuses for sticking around long enough to liquidate the company. Wall Street firms that loaded Toys ‘R’ Us with debt when they bought it in 2005 will have collected millions in fees from the company, even if they ultimately lost the majority of their investment. And employees like Ann Marie Reinhart, who worked as a supervisor at Toys ‘R’ Us for 29 years, will walk away with nothing.
Reinhart, 58, was a full-time supervisor at a Toys ‘R’ Us store in Durham, North Carolina, until she was laid off when her store closed in early April. Because Toys ‘R’ Us didn’t give her or her coworkers any severance, Reinhart is looking for a job and getting by on the wages her husband earns delivering auto parts.
“We can’t survive on his salary very long,” she said. “We’ve already dipped into our savings to pay bills.”
Reinhart is among the chain’s 30,000 employees who found out they would be laid off without severance when Toys ‘R’ Us announced it would close 735 stores in the US after failing to recover from bankruptcy. The company told workers in a March letter reviewed by BuzzFeed News that it has no money to pay severance — but even if it did have the cash, federal labor law doesn’t obligate it to do so.
Toys ‘R’ Us’s epic collapse illuminates Wall Street’s role in the retail apocalypse that has prompted a string of bankruptcies at private equity–backed retail companies, from Nine West, bought by Sycamore Partners in 2014, to Claire’s, bought by Apollo Management in 2007. Thirty-three percent of retail job losses from 2016 through 2017 resulted from private equity–backed store closures, according to a report from Inflection Capital Management, an equity management consulting firm. As the retail industry confronts the rise of e-commerce and rapidly changing consumer behaviors, many companies that took on debt in private equity buyouts to acquire cash are folding.
“It seems likely we’re about to see lots more bankruptcies like Toys ‘R’ Us, which means trouble for low-wage workers.”
“To be in retail now, you need to be unique; you need to offer something you can’t get online. And typically private equity firms tend to cut back,” Josh Kosman, author of The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis, told BuzzFeed News. “They’re not improving their stores and their product lines because the companies they buy have so much debt. So they’re not well-positioned to survive Amazon. And the consequences are, if revenue continues to fall, ultimately they will probably collapse.”
tora42's nonsensne 