Toys “R” Us Files for Bankruptcy
By Brenner Spiller & Archer, LLP | October 25, 2017
Toys “R” Us, the worldwide retailer of children’s’ toys, has filed for chapter 11 bankruptcy for its North American operations. According to the Wayne, New Jersey-based company, all stores are planned to stay open throughout filing.
Toys “R” Us has recently fallen into debt by nearly $5 billion dollars with analysts pointing mostly at online retailers having a step up in today’s purchasing habits. According to the Wall Street Journal, the retailer has also been struggling to repay debt to its vendors with increased and tighter demands.
CEO Dave Brandon has explained how the company plans for a long future in the industry. “We are confident that we are taking the right steps to ensure that the iconic Toys “R” Us and Babies “R” Us brands live on for many generations,” he said in a statement.
Top vendors of the company have resumed shipments of best-selling products in order to keep shelves stocked prior to the holiday season. Toys “R” Us brings in around 40 percent of its total revenues within the fourth quarter.
Prevention of Bankruptcy
Hindsight is 20/20, but looking back, Toys “R” Us could have taken steps to prevent filing:
Shifting efforts towards ecommerce. The chain likely spends a lot of time and money on their brick-and-mortar space, when others have been growing and thriving in the online marketplace.
Match competition. It’s been clear for a while that the superstore strategy works; just look at companies like Wal-Mart and Target. Price matching may have boosted performance.
Rethought a leveraged buyout. The $6.6 billion Toys “R” Us buyout in 2005 left the company with a heap of debt. Recommendations are debatable, but who knows where the company would be depending on key choices.
In the early 2000s, Toys “R” Us signed an agreement with Amazon to be sole supplier of toys, which Amazon eventually broke terms due to an inefficient amount of goods from the toy chain. The chain has over 30 stores within New Jersey and 1,600 stores worldwide across Africa, Australia, Asia and Europe.