Toys 'R' Us stores may be closing, but name will live on

[March 19, 2018]   By Tom Hals

WILMINGTON, Del (Reuters) - Barring a last-minute buyer, Toys 'R' Us will soon disappear from U.S. shopping centers, but the name and its iconic Geoffrey the Giraffe mascot are likely to survive for another generation of Toys 'R' Us kids.

Buyers often swoop in on retailers that are going out of business and scoop up brands with an eye on maintaining ties with loyal customers, minus the bricks and mortar.

"Toys 'R' Us -- that's a fabulous name," said Cathy Hershcopf, an attorney who specializes in retail bankruptcies. "The jingle, the customer lists, the logo ... and the giraffe goes along with it."

Brand specialists said they could not put an estimated value on the name, but it will be among the most valuable ever to become available through a bankruptcy liquidation.

The name adorns stores in 38 countries, from Australia to Zambia.

Retailers going out of business often sell their names and logos to the highest bidder, which generates some cash to help repay creditors. Examples include The Sharper Image, which filed for bankruptcy in 2008, and Coldwater Creek, which went bust in 2014.

The Sharper Image stores were known for featuring sleek gadgets like $5,000 massage chairs. Investors led by Hilco Consumer Capital swooped in and bought the company for $49 million and refashioned it as a licensor of lifestyle goods. Its website currently features drones, a toaster for bacon and motorized tie rack, all for less than $60.

Hilco specializes in buying well-known brands from dying companies, including home furnishings company Bombay, lingerie chain Frederick's of Hollywood and Linens-N-Things, as well as former tech titans Polaroid and Atari, according to its website.

Generally, interested buyers want to add a new brand to existing internet retail operations, although bankruptcy specialists said bidders on the Toys 'R' Us brand might acquire a small number of stores to operate as showrooms.

A Toys R Us store is pictured in Toronto, Ontario, Canada., March 15, 2018. REUTERS/Carlo Allegri

Alexander Chernev, a professor of marketing at the Kellogg School of Management, said brand buyers who succeed are those with strong operations like logistics but who lack emotional connections with their customers.

"They seek access not just to the market ... but also to the minds of the consumer."

He said Toys 'R' Us could make a good fit with a Chinese manufacturer that seeks credibility with consumers.

That's what happened with Robb & Stucky, a Florida-based furniture chain that liquidated in 2011. A Chinese manufacturer bought the name and trademarks and relaunched the store operations, according to Jordi Guso, a bankruptcy attorney with Berger Singerman.

Other failed brand names attract buyers who are more interested in defense than offense. Dick's Sporting Goods acquired The Sports Authority name through bankruptcy in 2016 for around $16 million, in part because an overseas rival was also interested, according to Hershcopf. The Sports Authority name was essentially removed from the market.

She dismissed concerns that the Toys 'R' Us brand was damaged by the chain's failure.

"I don’t think the brand is tarnished. I think the shopping in the old stores is tarnished."

(Reporting by Tom Hals in Wilmington, Delaware; Editing by Noeleen Walder and Andrea Ricci)

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