This blog is intended to go along with Population: An Introduction to Concepts and Issues, by John R. Weeks, published by Cengage Learning. The latest edition is the 12th (it came out in 2015), but this blog is meant to complement any edition of the book by showing the way in which demographic issues are regularly in the news.

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Saturday, March 17, 2018

Did the Low Birth Rate Kill Toys R Us?

This past week saw the closure of all of the Toys R Us stores in the U.S., following the company's closing of its stores in Britain. A story in the NYTimes emphasized the debt the company had piled up in a leveraged buyout in 2005 by a group of private equity firms. Competition was also fierce, especially from e-commerce such as Amazon. But the Washington Post picked up on a distinctly demographic aspect of the company's problem--the low birth rate. In its own statement, Toys R Us had stated the following:
The decrease of birthrates in countries where we operate could negatively affect our business. Most of our end-customers are newborns and children and, as a result, our revenue are dependent on the birthrates in countries where we operate. In recent years, many countries’ birthrates have dropped or stagnated as their population ages, and education and income levels increase. A continued and significant decline in the number of newborns and children in these countries could have a material adverse effect on our operating results.
The Washington Post reporters then dug into the numbers, comparing trends in the number of births to the company's revenue. Here's one of their graphics:

So, you can see that revenues tended to track births, if you believe these data. The problem is the number of births in the U.S. between 2010 and 2016 did not change in the way the above graph suggests. Here are the numbers from latest report by the Centers for Disease Control:

I'm sorry, but I don't see the trend. Toys R Us wasn't paying attention to the pattern of births, I suspect. They were focused on other things and that's what sunk them.

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