Toys “R” Us files for bankruptcy protection in U.S.; plans to follow suit in Canada

Toys ‘R’ Us, based in Wayne, New Jersey, announced the filing late Monday.

Toys “R” Us has filed for bankruptcy protection in the United States and says it intends to follow suit in Canada.

The company filed Chapter 11 documents late Monday in U.S. Bankruptcy Court in Richmond, Virginia and says its Canadian subsidiary plans to seek protection in parallel proceedings under the Companies’ Creditors Arrangement Act in the Ontario Superior Court of Justice.

The chain also said it had secured US$3 billion in financing to stay open while it restructures its outstanding debt and establishes a sustainable capital structure to invest in long-term growth.

Toys “R” Us said the “vast majority” of its approximately 1,600 Toys “R” Us and Babies “R” Us stores around the world and its web portals continue to operate as usual.

READ MORE: The Force awakens at Langley Toys “R” Us

READ MORE: Sears Canada closing 59 of its stores across Canada

The company added that it is committed to working with its vendors to ensure inventory levels are maintained and products continue to be delivered.

“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,” said chairman and CEO Dave Brandon in a statement.

“Together with our investors, our objective is to work with our debtholders and other creditors to restructure the $5 billion of long-term debt on our balance sheet.”

Toys “R” Us is headquartered in Wayne, N.J., and has nearly 65,000 employees worldwide.

The company said the proceedings are a way for Toys ‘R’ Us to work with its creditors on restructuring the debt beleaguering it. And it emphasized that its stores worldwide will remain open and it will work with suppliers and sell merchandise.

The move comes at a critical time leading into the holiday season that is crucial to retailers’ bottom lines. The company said it was “well stocked as we prepare for the holiday season and are excited about all of our upcoming in-store events.”

Retailers of all kinds are struggling, including Sears Canada, which has since closed more than 60 of its locations across B.C., laying off thousands of employees.

“Toys ‘R’ Us had little choice but to restructure and try to put itself on a firmer footing, said Neil Saunders, managing director of GlobalData Retail. However, he added, “even if the debt issues are solved, Toys ‘R’ Us still faces massive structural challenges against which it must battle.”

Retailers battle move to online shopping

Toys ‘R’ Us, a major force in toy retailing in the 1980s and early 1990s, started losing shoppers to discounters like Walmart and Target and then to Amazon. GlobalData Retail estimates that in 2016 about 13.7 per cent of toy sales were made online, up from 6.5 per cent five years ago.

And children are increasingly moving more toward mobile devices as playthings.

“For many children, electronics have become a replacement or a substitute for traditional toys,” Saunders said.

Analysts say Toys ‘R’ Us hasn’t been aggressive about building its online business, and has let those sales migrate to rivals. And they say the company should have also thought of new ways to attract more customers in its stores, such as hosting birthday parties.

While toy sales overall have held up fairly well, they are shifting toward discounters and online companies. U.S. toy sales rose 6 per cent last year on top of a seven per cent increase in the prior year, says NPD Group Inc., a market research firm. That was the biggest increase since 1999 and was fuelled by several blockbuster movies.

But for the first half of 2017, sales rose three per cent. That puts more pressure on the later part of the year, when most toy sales occur, for the industry to meet NPD’s estimate for a 4.5 per cent annual increase. Lego is laying off 1,400 workers after saying profits and sales dropped in the first half. And the nation’s two largest toy makers, Mattel and Hasbro, reported disappointing second-quarter results.

Toys ‘R’ Us, based in Wayne, New Jersey, announced the filing late Monday. It said it was voluntarily seeking relief through the U.S. Bankruptcy Court for the Eastern District of Virginia in Richmond, and that its Canadian subsidiary would be seeking similar protection through a Canadian court in Ontario as it seeks to reorganize.

Toys ‘R’ Us said it expects to continue honouring return policies, warranties and gift cards, and customer loyalty programs should stay the same.

In a separate statement late Monday, the company said its online sales sites worldwide remain open for business during the court-supervised process.

The Canadian Press

Like us on Facebook and follow us on Twitter.

Just Posted

Oregon couple’s stolen truck located at Deep Creek, boat still missing

Jim and Kathy Jantz are thankful for the help they have received so far in Williams Lake

B.C. sockeye returns drop as official calls 2019 ‘extremely challenging’

Federal government says officials are seeing the same thing off Alaska and Washington state

U.S. couple ‘devastated’ truck and boat stolen in Williams Lake overnight

Family from Oregon appealing for assistance to help find stolen items

Police name second suspect, lay kidnapping and attempted murder charges in connection with Rudy Johnson Bridge incidents

Drynock is considered dangerous, do not approach him and call the local RCMP detachment immediately

Skeena-Bulkley Valley candidates react to finding Trudeau broke ethics law

The election campaign is heating up before the writ has even dropped

New police force in Surrey must avoid VPD, RCMP errors made in Pickton case: Oppal

Boots are scheduled to be on the ground by spring 2021

Conan turns to the Property Brothers for tips on buying Greenland

Jonathan Scott suggests removing glaciers and mountains to bring in ‘more natural light’

Forests minister visits B.C. town rocked by multiple mill shutdowns

A third of Mackenzie turns out for rally, not much to cheer about

B.C. music teacher accused of sexual misconduct involving girls

Police believe other victims could be out there after the arrest of Lamar Victor Alviar

B.C. family stranded in Croatia desperate to come home

Funds being raised to bring back mom and two children

B.C. man on trial for daughters’ murders says an intruder broke in

Andrew Berry takes stand in his defense for December 2017 deaths of young daughters

‘Plenty of time for a deal’: Teachers’ union expects kids back in school on Sept. 3

BCTF says class size, composition at the heart of the issue

Province funds new shuttle buses for 13 B.C. senior centres

Activity, socializing helps maintain health, Adrian Dix says

Most Read