Toys "R" Us Inc., the once-dominant specialty retailer and ultimate toyland for a generation of post-war baby boomers, filed for bankruptcy thanks to a crushing debt load from a previous buyout and relentless competition from warehouse and online retailers.
The firm is likely going to look at its online presence within this, as Toys "R" Us has struggled to deal with the growing importance of ecommerce in the retail sphere, with 2016 statistics showing that 13.7% of all toy sales came online, up from 6.5% five years previously. It also points out that its online stores for Toys R Us and Babies R us will remain open.
Toys "R" Us had previously disclosed in a regulatory filing in June that it'd hired Lazard to restructure its $5.2 billion debt load.
Officials said in a a court filing Tuesday that "leases are a substantial burden" on its finances.
Toys "R" Us said in a statement that its Canadian unit aspires to attempt security in parallel litigation under the Companies' Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice.
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Will Toys "R" Us and Babies "R" Us continue to run typical sales and promotions? However, the Australian and European operations, as well as a joint venture partnership in Asia, are not included in the Chapter 11 filing.
"Toys "R" Us had little choice but to restructure and try to put itself on a firmer footing, said Neil Saunders, managing director of GlobalData Retail".
Toys "R" Us is headquartered in Wayne, N.J., and has almost 65,000 employees worldwide. Toys R Us is also where I played Resident Evil on the PlayStation for the first time too. It hasn't worked. Neither have its big bets on licensed toys from movies like "Star Wars" and "Lego", as the Wall Street Journal noted.
In many respects, suppliers have been propping up Toys "R" Us for years, according to Moody's Corp. analyst Charlie O'Shea; they give the chain exclusive products during the holidays and funds for promotions to help it compete with the general merchandizers.
Toys R Us also says that it will continue to treat employees the same during its bankruptcy.
The company does not plan to close a "disproportionate" number of its more than 1,600 stores across the country and aims to add smaller shops in urban areas including Washington, D.C., Boston and Detroit, Brandon said. The private equity companies could lose their funds' entire Toys "R" Us investment of $1.3 billion, since equity holders are typically wiped out while banks and bond holders are paid first. Walmart, the largest toy store in the country, claimed the second spot online with almost $1.3 billion. US toy sales rose 6 percent last year on top of a 7 percent increase in the prior year, according to NPD Group Inc., a market research firm.