Toys R Us files bankruptcy; stores remaining open so far

Posted September 21, 2017

The 82 stores of Toys " R " Us in Canada, as well as its website, will continue to be operated during the restructuring proceedings under the Law on arrangements with creditors of companies ("CCAA").

Here's what it means to be the largest specialty toy and baby goods retailer in the U.S. in 2017: 866 stores nationwide, Chapter 11 bankruptcy, and getting dominated online by Amazon.

The retailer has made no announcement about closing stores or inventory reduction.

Following some speculation about its financial woes, Toys R Us has officially filed for Chapter 11 Bankruptcy.

Jon Copestake, chief retail and consumer goods analyst at the Economist Intelligence Unit, said the bankruptcy filing has come as "little surprise".

The move would ensure the Canadian subsidiary of the global toy retailer - which applied for creditor protection in the USA on Monday and in Canada a day later - has an uninterrupted supply of merchandise as it heads into the busy holiday shopping season. But long before Amazon battered Toys 'R Us with a much deeper selection, Walmart was beating up the toy retailer with aggressive pricing on the most popular items during holiday seasons.

Meanwhile, credit ratings of Toys "R" Us took a beating as rating agencies lowered their ratings as a result of the bankruptcy filing. Mattel, the largest toymaker, called Toys "R" Us "one of our most important retail partners".

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Shoppers are constantly asking whether Toys "R" Us is going out of business, according to an employee at the store who asked not to be named because he wasn't allowed to speak to the press.

Li Jiewei, a spokesman with the China Toy and Juvenile Products Association, thinks demand for toys remains robust, regardless of the problems at Toys "R" Us. But the big-box toy retailer is struggling with $5 billion in long-term debt, which it spends $400 million a year to service.

Finance companies such as Barclays, Goldman Sachs, JPMorgan Chase, and Wells Fargo aim to help Toys "R" Us with its financing during its bankruptcy.

When asked about possible layoffs, Toys "R" Us responded to a Global News email saying the bankruptcy protection isn't about "store closures or staff reductions", but rather a "proactive step" to improve the business.

By the time Lazarus retired in 1994, the company had grown to more than 1,000 stores. 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.

Lee explained that while a decade ago children were playing with traditional toys, the store needs to adapt to the "new kids on the block" that would rather buy electronics.

While toy sales overall have held up fairly well, they are shifting toward discounters and online companies. The toy retailer represents about 10 to 20 percent of the Chinese supplier's sales.