No more playing around – Toys ‘R’ Us is out of the retail game
Last September, Toys “R” Us chairman and CEO Dave Brandon spoke of “the dawn of a new era” for his company after the retailer filed for Chapter 11 bankruptcy protection. While Mr. Brandon spoke of a brighter future where the company would be in a better position to deal with a debt load of $5 billion, many were skeptical. Unfortunately, the skeptics were right. Toys “R” Us has announced it will begin the process of shuttering all 735 of its U.S. stores.
Mr. Brandon said the move was unavoidable as the retailer no longer had the financial support it needed to continue operating in the U.S. “This is a profoundly sad day for us as well as millions of kids and families who we have served for the past 70 years,” he said in a statement.
While Toys “R” Us has not announced a specific figure, The Wall Street Journal estimates that 33,000 Americans working at the chain’s stores and in supporting positions will soon be out of jobs.
The Journal reported last month that the retailer had backed off a promise to pay severance to affected store workers in January. A Toys “R” Us spokesperson told the paper that some store employees may be eligible for performance bonuses connected to liquidation sales.
One slight glimmer of hope is that Toys “R” Us has said it is having discussions with “interested parties” that may be willing to acquire up to 200 of the chain’s top stores in the U.S. along with its stronger Canadian business. The retailer said it intends to go ahead with liquidation sales at these locations as if a deal will not be struck.
In the end, Toys “R” Us’s demise is likely to be tied to the $6.6 billion leveraged buyout of the company by Vornado Realty Trust, Bain Capital and KKR & Co. Over the years, Toys “R” Us has lacked the capital to remodel stores and create greater synergy between online and physical locations as it sought to pay down debt.
- Toys “R” US to Wind Down U.S. Business – Toys “R” Us, Inc.
- Toys ‘R’ Us Tells Workers It Will Likely Close All U.S. Stores – The Wall Street Journal
- Is Toys ‘R’ Us nearing the point of no return? – RetailWire
- Toys ‘R’ Us files for bankruptcy, enters ‘new era – RetailWire
DISCUSSION QUESTIONS: Why do you think Toys “R” Us failed? What will the liquidation of Toys “R” Us mean for retailers and vendors in the toy category? How will store closings affect the retail real estate market?