Toys R Us Files Bankruptcy As The Holiday Season Fast Approaches
The largest toy store chain in the world filed Chapter 11 bankruptcy Monday night, causing a tremor of fear to ripple through the market as the holiday season fast approaches.
Like many others, Toys R Us Inc. has struggled to compete with the online presence and low prices of brands like Amazon and Walmart. The toy chain is the latest in a series of retail bankruptcies filed this year, including BCBG Max Azria, RadioShack and HHGregg.
With an estimated $400M in debt payments coming due in 2018, the company was forced to make a quick decision about how it planned to deal with its total $4.9B in debt.
The retailer confirmed in a statement that both its physical stores and online operations would be open for business during bankruptcy proceedings.
"As the holiday season ramps up, our physical and web stores are open for business, and our team members around the world look forward to continuing to put huge smiles on children’s faces," Toys R US CEO Dave Brandon said in a statement.
A group of lenders, including JPMorgan Chase, has agreed to provide $3B in financing so Toys R Us can continue to pay its suppliers and employees to keep its 1,600-plus stores that are slated to remain open operational.
This is not the retailer's first stint with financial trouble, the New York Times reports. Private equity firms Kohlberg Kravis Roberts and Bain Capital and real estate firm Vornado purchased the company for $6B in a 2005 leveraged buyout.
After a failed attempt to reinvent itself in 2016, the toy store began to focus on shrinking store sizes in half in order to engage customers through special services and entertainment.
Many of the struggles have been tied to the industry's shift to e-commerce, though some analysts attribute Toys R Us' struggles to poor marketing and an inability to adapt to changing consumer needs.