Toys “R” Us Files for Bankruptcy to Manage Massive Debt
The toy store chain has failed to keep up in the digital age.
After decades of being America’s premier toy store, Toys “R” Us may be heading to that big toy bin in the sky. While Toys ” one of the largest toy store chains in the world (there are more than 1,600 locations around the world), the company has struggled to stay relevant in a world dominated by online shopping. And last night, Toys “R” Us officially filed for Chapter 11 bankruptcy in federal court in Virginia, an attempt to structure their more than $5 billion in debt.
Even with the Amazons, Targets, Walmarts, and other e-commerce giants of the world casting considerable shadows, Toys “R” Us failed to keep up with the digital times (13.7 percent of toy sales were made online in 2016) In fact, the company never really got serious about e-commerce until this past spring when they finally revamped their woefully outdated website. And with a $400 million debt payment due in 2018, the toy company needed immediate assistance to have any chance of avoiding closing its doors for good. JPMorgan Chase and other lenders agreed to give Toys “R” Us $3 billion so that the company can continue paying suppliers and employees.
While filing for bankruptcy is almost never a good sign, Dave Brandon, the company’s chairman and chief executive, was optimistic about the future of Toys “R” Us. “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,” Brandon said in a statement. Still, things aren’t looking so good. With an oh-so-crucial holiday season approaching, Toys “R” Us might not receive product shipments, as the Wall Street Journal reports that “nervous suppliers have tightened terms for the retailer.”
For now, Toys “R” Us claims that all of its stores, including Babies “R” Us, will remain open as it tries to manage its debt and create a plan for long-term growth. Still, it seems likely that Toys “R” Us has done too little too late. But, you never know. Besides, everybody loves a comeback.