Toys R Us Filed for Bankruptcy and People Are Upset

Chelsea West
September 21, 2017

The latest expansion news comes a day after Toys "R" Us filed for bankruptcy protection in the United States, saying it intends to follow suit in Canada as online competition takes an increasing toll on in-person retailers.

He said: "Alarm bells will have been ringing for some time but it took until May this year for an online store revamp to take effect and it is hard to see how Toys'R'Us could address the structural challenges it faced without reducing it's store footprint and significantly changing its proposition". It also points out that its online stores for Toys R Us and Babies R us will remain open.

Jon Copestake, chief retail and consumer goods analyst at the Economist Intelligence Unit, said the bankruptcy filing has come as "little surprise". Its Canadian subsidiary also sought creditor protection under the Companies' Creditors Arrangement Act in the Ontario Superior Court of Justice Tuesday.

Toys R Us entered Chapter 11 bankruptcy protection Monday, pitching a business-as-usual approach to customers and suppliers as the crucial holiday shopping season approaches. If Toys "R" Us can emerge from bankruptcy with less debt plus money to reinvest in its business, the process could mark a turning point.

Brandon said in the court filings that he hoped Chapter 11 would enable the company to address the financial constraints that "have held us back" in a "lasting and effective way".

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According to Bloomberg, Toys "R" Us' decision to file for bankruptcy would let it concentrate on its debt of $400 million that must be paid in 2018. Initiatives include improving its website and revamping its Babies R Us business, by focusing on items like cribs that are less likely than diapers to be sold on Amazon. 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.

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.

Operations outside of the USA and Canada, including about 255 licenced stores and joint venture partnerships in Asia, which are separate entities, are not part of the bankruptcy proceedings, Toys "R" Us said.

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. Two other retailers-Payless ShoeSource, a 61-year-old discount shoe-seller from Kansas, and Gymboree, which began selling children's clothing in 1986-are among those that declared bankruptcy this year after being backed by private-equity firms that left them similarly weighed down.

Toys R Us traces its roots to 1948, when founder Charles Lazarus opened a baby furniture store in Washington. Its shares dropped 6.6 percent.

Other reports by TheSundaySentinel

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