Ann Marie Reinhart Smith worked at Toys “R” Us for 29 years. Now, the Durham, North Carolina grandmother is unemployed after being laid off as part of the iconic American toy store’s bankruptcy and liquidation.
Smith is just one of more than 30,000 US workers who face unemployment as the 70-year-old retail chain unwinds its business after a decade of disastrous management by the Wall Street firms that purchased the company and saddled it with billions of dollars of debt.
Workers with decades of retail experience are being left with no jobs, no benefits and no severance pay.
Meanwhile, the private-equity barons who bought the company in 2005 have reaped nearly $500 million in extracted profits, and top executives are set to leave with $16 million worth of golden parachutes.
Smith’s story is a potent reminder of the human cost that Wall Street vulture capitalists inflict on working-class people in their seemingly never-ending pursuit of profit. “Retail workers are already poorly paid,” Smith says. “Now, to be let go without any severance is devastating. Not knowing how you’re going to pay your rent, feed your family, and pay your bills is absolutely humiliating.”
Private-equity and hedge-fund managers are taking advantage of retail workers to bolster their profits without regard for the middle-class communities that they are destroying. In the process, these bankers are perpetuating a vicious cycle in which the rich get richer at the expense of working people.
Despite bringing in almost $12 billion in sales in 2016, once-profitable Toys “R” Us was losing money every year since 2013, burdened by crippling long-term debt payments of more than $400 million to service its crushing $5.2 billion debt pile. This debt is a legacy of a 2005 leveraged buyout by two of the most notorious private-equity companies in the United States: Bain Capital and Kohlberg Kravis Roberts & Co. (KKR), among other companies.
Now the fabled toy store chain has finally collapsed under this crushing debt, causing the third-largest retail Chapter 11 bankruptcy in US history, and threatening the livelihoods of more than 30,000 working-class families.
The Wall Street fund managers at KKR and Bain Capital don’t seem to care about that—in fact, they’re laughing all the way to the bank, having raided Toys “R” Us for nearly $500 million in profits over the last decade. Meanwhile, more than 30,000 workers are facing the prospect of losing their jobs with no severance pay. Hundreds of communities across the country will bear the social and economic cost of this plunder.