KB, Bain Capital and Romney; Toys and Politics


Richardglobalheader
Bain-capital-pe
KB Toys was a retailer that seemed to stay around long
after it was dead
.  This chain of mall
based toy stores struggled for years as it searched for a business model that
would return it to its glory years when shopping malls were the rage and
consumers had not yet become as obsessed with price. 

Mitt-romney-2_gi_top
It appears that, like in one of those mummy movies, KB
has just sat up in its grave, drawn back to our world by the 2012
election
.   Mitt Romney, the Republican
Presidential candidate, is one of the founders of Bain Capital, a private equity and venture capital investment
company.  Bain owned KB at the time it filed its first bankruptcy in 2004.  The company came out of bankruptcy when it was purchased in 2005 by Prentice Capital Management.  It was under the ownership of the latter that the decision was made to liquidate the company in 2008. [Correction:  In an earlier version of this article I stated that Bain
Capital owned KB when it filed for bankruptcy in 2008.  This was
incorrect.  Bain was the owner when KB filed for bankruptcy the first
time, in 2004.]

8KBtoys
I am going to let others
discuss the political implications of Bain, KB and the election
.  I do think, however, that we are remiss in
not analyzing the impact that Bain has had on the toy industry.  After all, Bain has owned or owns the number one and number 2 toy chains:  Toys R Us and KB. 
They


have also held positions in companies that were tangentially
important to the toy industry like Burlington Coat Factory (carries toys);
Brookstone (carried high tech toys) and Michaels (carries toys).

 Over the
course of my next two postings I am going to be taking a look at Bain through
its performance at KB and Toys R Us so your insights are welcome.  Bottom line, I want to see what Bain’s
performance says about its strengths or weaknesses as a player in the toy
industry. 

If you worked for KB,
were a vendor, a rep, an investor, an interested party or just plain interested, please let us know
any insights you may have.
Let us know your
thoughts on two core question:  Has Bain
Capital been good for the toy industry? 
Has the toy industry been good for Bain Capital? 

 

 

8 thoughts

  1. How are the economic policies of the current administration affecting small business (and the toy industry)?
    Here’s what I’ve been dealing with. In 2008, my specialty toy store did $1.2 million – a very strong year. Starting the day after the 2008 election, we started seeing negative comps. Why? Near as I can tell, it was the fear of what this “new” administration would bring.
    Ever since then, the policies and rhetoric has been to take more from those who are successful. Those are the specialty customers. As a result, nationwide, small business has sufferred dramatically – fewer businesses are opening, more are closing, and as a result, main-street has many more vacancies.
    Mid to Upper income consumers have been spending less with the uncertainty in their job markets. Over the last four years, our annual sales have dropped by 30%. We’ve been forced to keep staffing extremely lean (less job creation) in order to keep our doors open.
    Net result of these policies — economic sluggishness, less employment, and fewer businesses being created. Sum total – for businesses to be created and create jobs, the business owners MUST have the confidence in our government’s policies and enough stability to justify our investments.
    Our health care costs have gone up by more than 50% over the past 4 years. This is not stability. Obamacare is a great concept, but it totally misses the root cause of high health care. When 40% of each health care insurance dollar goes to pay lawyers instead of medical care, THAT is the problem. Can’t blame the doctors. Can’t blame the insurance companies. Fix the personal responsibility in this nation and that will lead us in the correct direction for fixing many of the causes of overspending that are stifling the American dream and Entrepreneurial Spirit.

  2. The last line is so true. “the toy businesses is not Childs play” I can attest to that as we have had battles with bigger companies, espionage, deliberate undermining through rep bashing and a whole lot more. The stories of the underbelly of the toy industry are frightening.

  3. Mitt Romney didn’t ruin anyone’s childhood. Of course, it’s obvious Mitt was long gone when KB bit the proverbial dust. If Bain couldn’t save it, no one could. Unfortunate, but true. Look at all of the other large and small toy retailers that went bust in the 90s and 2000s… should we blame one man for them all? The toy business is NOT child’s play, as they say.

  4. Blaming Bain or anyone else for the demise of KB is childish. At the time of their bankruptcy there was a sea change affecting the toy industry…such that Toys R Us was even struggling….Walmart & Target were eating their lunch since shoppers visit their stores 52x per year! Toy products felt ubiquitous…every retailer carried them. Toys R Us & KB had a price and convenience disadvantage as well as a non-differentiated retail experience.

  5. What does politics have to do with this???
    I sold product to KB at the same price as I did to Walmart. KB went with a 70% markup and Walmart a 40%.
    What does that tell you?
    KB wasn’t in my opinion making a higher profit, they had higher overhead. A recipe for demise. Toys R Us was at about 60%.
    My company sold plastic foam toys, made in the USA.

  6. We’re also interested in knowing how the economic policies of the current U.S. presidential administration are impacting upon the toy industry, especially the smaller, specialized toy shops across the country.
    Thanks!

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