Toys ‘R’ US Files for Bankruptcy Protection in U.S. and Canada

The American toy and juvenile-products retailer, Toys ‘R’ US, announced late last night that it filed for bankruptcy protection in U.S. and Canada as it struggled against larger rivals such as Amazon, Walmart, and Target. The company is the latest victim of a catastrophe suffered by brick-and-mortar retailer that is caught in a vise-like grip of online shopping and discount chains.

The company didn’t disclose the status of its 64,000 employees at its 1,600 stores, but according to a report that at least some of the outlets would be closed and the format changed in others. However, in another statement, the company’s leadership assured customers that its 1,600 stores around the globe would continue to operate normally.

Even though the toy industry has grown, the America’s powerhouse of toys has been struggling for years.

About Toys ‘R’ US Chapter 11 filing

Over the years, the retailer company has become the largest toy store in the United States with low prices that killed stylish independents like FAO Schwartz and Kay Bee Toys, both of which themselves filed for bankruptcy.

The bankruptcy filing of Toys ‘R’ US, however, helps the toy retailer relieve itself of the debt left over from its $6.6 billion acquisition by Kohlberg Kravis Roberts, Bain Capital Partners, and real estate investment trust, Vornado Realty Trust, in 2005 deal.

The company plans to restructure its long-term debt with which it is weighed down in hopes of keeping it afloat in a marketplace that has vastly changed with increased competition from both big box stores such as Walmart and Target and online retailers such as Amazon.

The Chapter 11 filing is the among the largest ever by a specialty retailer. It comes just as Toys “R” US is gearing up for the holiday shopping season, which accounts for the bulk of its sales.

According to a report, the company’s operations in Australia and Europe and a joint venture in Asia are not part of the bankruptcy proceedings.

In addition, the company said it will remain open during the Christmas holidays when it does most of its business, and had received $3 billion in banking support to restructure itself. The company said only its U.S. and Canada stores will be involved in the bankruptcy, and that the remainder will not be affected.

“While today’s decision does not necessarily mean it is game over for Toys “R” US, it brings to close a turbulent chapter in the iconic company’s history,” said Neil Saunders, managing director of Global Data Retail.

Dave Brandon, Toys “R” US, said, “Today marks the dawn of a new era at Toys “R’ US where we expect that the financial constraints that have held us back will be addressed in a lasting and effective way.”

“We are confident that these are the right steps to ensure that the iconic Toys ‘R’ US and Babies ‘R’ US brands live on for many generations,” Branded added.