Baby gear makers take big hit in TRU bankruptcy

Baby gear makers take big hit in TRU bankruptcy. Among the biggest losers in the Toys R Us/Babies R Us bankruptcy are baby gear makers that relied on the chain for a big chunk of their business.

While large toy companies like Hasbro or Mattel can probably withstand the losses that will surely come from the filing, smaller baby gear makers with less capital reserves could find themselves in financial trouble as well.

Here’s a rundown of what Toys R Us and Babies R Us owes the biggest baby gear makers (source: Toys R Us bankruptcy petition):

Graco: $59 million.
Kids II (Bright Starts, Baby Einstein, Ingenuity): $10 million
Dorel (Cosco, Safety 1st, Maxi Cosi): $9.19 million
C&T (Sorelle baby furniture): $8.6 million
Delta: $8 million
Evenflo: $4.9 million
Baby Trend: $4.9 million
Best Chairs: $4.2 million
GoodBaby (GB, Cybex): $3.68 million
Skip Hop: $3.47 million
Munchkin: $3.18 million
Kolcraft: $2.45 million

And those amounts are actually worse than they look: that’s because under bankruptcy rules, Toys R Us can “claw back” up to 90 days worth of payments made to baby gear makers before the bankruptcy filing. That is on top of the monies owed.

Toys R Us plans to restructure its debts, so it is unclear how much of a haircut the baby gear makers will have to take on their owed amounts.

It’s stunning to see how deep Babies R Us is in debt to baby gear makers—Graco’s nearly $60 million is almost the same as owed Hasbro, which one would figure would have bigger sales to the biggest toy retailer in the country. Amazingly, Graco is owned nearly TWICE as much as LEGO ($31.5 million).

Let’s talk about Graco for a second: assuming the $59 million represents about 120 days worth of sales, that means that Babies R US accounted for about $177 million in annual sales for Graco. In 2016, Graco’s owner (Newell) reported Graco’s TOTAL sales was $209.8 million.

Yes, this is just speculation—but does that mean that Babies R Us is 84% of Graco entire business? That seems a bit much, considering Graco is also sold in Walmart and Target. But the amount owed to Graco is still staggering.

Looking at this another way: Graco’s reported operating income was just $23 million in 2016. So the Toys R Us bankruptcy could wipe out nearly three years of operating income if none of the debts are repaid.