Toys "R" Us, the world's leading retailer dedicated to toy and baby products, filed for chapter 11 bankruptcy protection late Monday night due to a debt load and severe competition from online retailers.
Toyrs "R" Us said Tuesday it has filed for Chapter 11 reorganization in U.S. Bankruptcy Court.
The filing, meant to restructure five billion dollars of long-term debt, is one of the largest ever by a specialty retailer and casts doubt over the future of the company's 64,000 employees and almost 1,600 stores, which remain open as of now.
Melanie Teed-Murch, President of Toys " R " Us and Babies " R " Us Canada, commented, "The restructuring is meant to facilitate the continued success of our iconic brands; building a stronger company for our customers, business partners and team members". It said it had lined up $3.0 billion in financing and that its stores and websites were open and operating normally.
A customer walks into a Toys R Us store in Dallas, Tuesday, Sept. 19, 2017.
The company, which is headquartered in Wayne, N.J., and has almost 65,000 employees worldwide, says it is committed to working with its vendors to ensure inventory levels are maintained and products continue to be delivered.
Toys "R" Us said it expects to survive.
The filing - just the latest in a string of high-profile bankruptcies this year - comes on the heels of the all-important holiday shopping season, which can account for half of retailers' annual sales.
Toys "R" Us is now owned by three companies - private equity firms Kohlberg Kravis Roberts and Bain Capital, and real estate firm Vornado Realty Trust - that purchased it for about $6 billion in 2005.
'It is hard to see how Toys R Us could address the challenges it faces without reducing its store footprint and significantly changing its proposition'.
Retailers of all kinds are struggling, including Sears Canada, which has since closed more than 60 of its locations across B.C., laying off thousands of employees.
To compete with e-commerce giants, traditional retailers as Toys "R" Us would have needed to slash prices to stay on the track.
The bankruptcies of almost three dozen retailers since the beginning of the year - many of them very small companies, but also well-known names like Payless Shoe Source, Gymboree Corp. and True Religion jeans - has resulted in job losses and store closings.
But Matthew Hudak, a senior toys and games analyst at Euromonitor International, said the company would struggle to cash in on trends in toy sales.
Meanwhile, children are increasingly gravitating towards digital toys rather than physical trinkets, he added.
Toys "R" Us, a major force in toy retailing in the 1980s and early 1990s, started losing shoppers to discounters like Walmart and Target and then to Amazon.
GlobalData Retail estimates that about 13.7 percent of toy sales were made online in 2016, up from 6.5 percent five years ago. US toy sales rose 6 per cent last year on top of a seven per cent increase in the prior year, says NPD Group Inc., a market research firm.
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