Toys ‘R’ Us Inc. is the largest toy store chain in the US. Yesterday, they filed for bankruptcy. Not too long ago, I never would have thought that was possible. We used to shop there all the time when my kids were little. They were always expensive, but you could find so many toys there. Amazon and other retailers on line have taken their toll on the toy giant. They just can’t compete anymore. It’s the way of the business world. It’s not just toys, it’s all shopping out there. Frankly, my family does almost all of their shopping online anymore… most of it on Amazon. We still go to the grocery store, but even there, more and more of those items are being bought online and delivered. It’s fast, easy and you get exactly what you want. It’s a no-brainer.
Toys ‘R’ Us said it has received a commitment for over $3 billion in debtor-in-possession financing from lenders including a JPMorgan-led bank syndicate and certain of the company’s existing lenders. The injection of capital should keep them afloat. It’s subject to court approval though. I don’t think that will be a hurdle. It will immediately improve the health of the company and keep its on-going operations functioning during the court-supervised process.
The company’s Canadian unit intends to seek protection in parallel proceedings under the Companies’ Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice, Toys ‘R’ Us said in a statement. The retailer’s operations outside of the United States and Canada, including about 255 licensed stores and joint venture partnerships in Asia, which are separate entities, are not part of the Chapter 11 filing and CCAA proceedings. But this still puts over 64,000 employees worldwide at risk of losing their jobs. It impacts over 1,600 stores. This bankruptcy filing is one of the largest by a specialty retailer to ever occur.
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This comes at a really bad time as stores such as Toys ‘R’ Us are gearing up for the holiday shopping season. This time of year accounts for the majority of their sales. Toys ‘R’ Us filed the petition in the US Bankruptcy Court for the Eastern District of Virginia in Richmond, Virginia.
The company has not shown a net quarterly gain since 2013, reports Bloomberg. Four years is a long time to not make a profit. That can be deadly to an outfit such as Toys ‘R’ Us.
Toys ‘R’ Us first opened up in 1957. Its first CEO, Charles Lazarus, was at the helm of the company until 1994. They were bought out in 2005. During that process, they accumulated major debts that they have never been able to pay off. The company experienced some renewed success under CEO David Brandon, who since 2015 has sought to make Toys ‘R’ Us the destination for children that it once was. But, they just couldn’t compete with the online retail industry on price, delivery times or selection. Toys ‘R’ Us has more than 800 locations in the United States and has stores from the United Kingdom to Japan.
There’s a part of me that hates this. It’s like losing an old friend. I am sad to see Toys ‘R’ Us die like this. There’s another part of me that knows it had to be this way. Things are changing at the speed of light and they just couldn’t keep up. I’ll always have a soft spot for the toy giant because of my kids and frankly, because we loved shopping there too.