Toys ‘R’ Us files for bankruptcy, enters ‘new era’
Toys “R” Us announced yesterday that it has filed for Chapter 11 bankruptcy as the chain hopes that restructuring will allow it to manage its $5 billion debt load while positioning its business to compete against bigger and stronger competitors ranging from Amazon.com to Walmart.
While Toys “R” Us expects to close an undisclosed number of underperforming stores as part of its restructuring, it expects to keep most of its 1,600 stores open. The chain maintains that
“the vast majority” of its locations are profitable.
Toys “R” Us has received a commitment of over $3 billion in debtor-in-possession financing that it intends to use to improve its liquidity while maintaining operations. Chairman and CEO Dave Brandon said the company plans to restructure its long-term debt, which will give it the flexibility to invest in improving the customer experience in the chain’s stores and online.
Mr. Brandon called the action “the dawn of a new era at Toys “R” Us,” promising that the company will work with vendors to assure it has the right inventory in place for the upcoming holiday season.
The Wall Street Journal reports that Toys “R” Us is likely to receive vendor support as suppliers would suffer adverse effects if one of their largest retail customers were to fail. The two largest toy makers — Mattel and Hasbro — are owed nearly $200 million combined from Toys “R” Us, the paper reports.
- Toys “R” Us, Inc. Commences Court-Supervised Processes to Implement Financial Restructuring – Toys “R” Us, Inc.
- Toys ‘R’ Us, Once a Category Killer, Is Forced Into Bankruptcy – The Wall Street Journal
- Can toys raise J.C. Penney’s game? – RetailWire
- Toys ‘R’ Us mulls small, urban stores as part of turnaround – RetailWire
DISCUSSION QUESTIONS: Will Toys “R” Us be in a better position to compete following its restructuring under Chapter 11? What will the chain need to do to avoid losing any of its stakeholders — investors, lenders, vendors, associates and consumers — in the process?