Toys R Us carried roughly $5 billion in debt when it filed for US bankruptcy protection in September 2017, most of it left over from a 2005 leveraged buyout by Bain Capital, KKR and Vornado Realty Trust. The stores were still, by most measures, doing fine. Foot traffic was softer than the glory years but not catastrophic. What killed the company wasn’t a lack of customers. It was an interest bill of around $400 million a year on debt that had nothing to do with selling toys.
I keep coming back to that number because it’s the cleanest illustration of a pattern that shows up again and again once you start looking for it. A business figures out how to dominate one category (toys, electronics, hardware, music) builds a format…