Toys “R” Us Reportedly Preparing to Liquidate its US Stores

Major toy retailer Toys “R” Us Inc. was reportedly preparing to liquidate all of its US operations and end attempts to restructure through the bankruptcy process.

Sources familiar with the matter said that while the situation is still not yet official, the closure of its US store base became more and more inevitable in recent days.

The struggling toy chain has been unable to find a buyer, or even secure a new debt financing deal with its lenders to keep some of its business running. The New Jersey-based company is also believed to be exploring other options, including a potential sale in bankruptcy if possible.

Sources stated that an announcement could come as soon as Monday, when the parties are expected to attend a bankruptcy hearing in Virginia, adding that how much Toys “R” Us decides to liquidate will depend on the amount of the liquidator bids it receives.

The company is also expected to present its three-month earnings report later this month.

Following the report, shares of two of world’s largest toymakers, including Mattel Inc. and Hasbro Inc. fell as much as 6.1 percent and 3 percent respectively in after-hours trading.  

Shares of Mattel are currently down by 6 percent to $15, while Hasbro declined by 2.7 percent to $90.77.

Toys “R” Us’ Struggles Pile Up

Last month, the toy retailer was reportedly planning to shutdown 150 out of its 880 US stores, but some news reports have stated that it is closing another 200 locations in addition to the 150.

Toys “R” Us already said in January that it would shutter 180, or 20 percent of its chains in the country, as part of its efforts to reorganize its debts. Around 4,500 jobs were at risk with the first round of shutdowns.

The company filed for a Chapter 11 bankruptcy protection in September, with hopes of restructuring its $5 billion debt load, turnaround its stores and operations, as well as continuing as a staple toy business.

The chain then got a new $3.1 billion loan to keep its stores open during the revamp, but it did no good during the holiday season, creating doubt on the retailer’s capabilities.

Toys “R” Us’ business has also suffered in Britain in recent years, after it fell behind on debt payments, leaving its UK division under administration and risking about 3,000 jobs there.

Moreover, the company has faced strong competition from leading online retailers, including Amazon.com Inc. and Walmart Inc.

Some of its troubles also included its $6.6 billion leveraged buyout by private equity firms, Bain Capital KKR & Co. LP in 2005.

Pressured by debt, Toys “R” Us was unable to invest in e-commerce and new ideas that would have 

helped it to keep on competing against Amazon and other rivals.

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