Toys R Us files bankruptcy; stores remaining open so far

Consumers shop at a Toys “R” Us store in Miami

Toys "R" Us in the Philippines said Wednesday it was "open for business" even as its North American operations sought bankruptcy protection.

Toys'R'Us, which has around 1,600 stores worldwide and almost 65,000 employees, said most of its shops remained profitable and would operate "as usual" while it looks to restructure a 5.6billion U.S. dollar (£3.6bn) debt mountain.

The company filed under Chapter 11 of the USA bankruptcy laws late Monday, which will allow it to stay open and protect it from creditors' claims while it restructures its long-term debt of more than $5 billion. 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. Toys "R" Us hopes to restructure its debt, get a new growth plan and reorganize its stores.

The company listed debt and assets of more than $1bn each in Chapter 11 documents at the US Bankruptcy Court in Richmond, Virginia.

"The breathing room afforded by the CCAA and Chapter 11 proceedings will preserve value for stakeholders, while enabling Toys Canada to continue to operate without disruption as it moves into the holiday season", according to the affidavit of Melanie Teed-Murch, president of Toys "R" Us Canada since August 2016. However, Retail Dive reported that Toys R Us accounted for only 10% of Mattel and Hasbro's annual revenue.




"Our customers around the world can continue to count on an outstanding shopping experience and excellent service whenever, wherever and however they choose to shop with us", he said.

"When thinking about shopping online, many consumers just don't think of traditional big-box retailers as the first place to go in the digital space", Beahm said.

The firms UK, European and Australian operations aren't expected to be part of the bankruptcy proceedings at this time given that they remain profitable, however as we saw in the case of the closure of American Apparel's UK operations past year, after its parent company filed for Chapter 11, in 2015, that doesn't mean it may not happen at a later stage. Amazon and Toys "R" Us settled the case in 2009.

Prior to filing, the chain secured more than $3bn in financing from lenders including a JPMorgan-led bank syndicate and certain existing lenders to fund operations while it restructures, according to a company statement. But the company had a debt problem and is facing the same challenges as a lot of other bricks-and-mortar stores. US toy sales rose 6 percent last year on top of a 7 percent increase in the prior year, according to NPD Group Inc., a market research firm.

One way for the company to adapt would be to have "interactive and experiential" stores, with more opportunities for children and parents to test and play with products. It has struggled with debt since private-equity firms Bain Capital, KKR & Co and Vornado Realty Trust took it private in a 6.6bn dollar buyout in 2005.

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