The news came in earlier today that Toys R Us was closing all stores in the U.K., and now the official word has dropped that all U.S. stores will be either sold or closed as well. The move will affect as many as 33,000 jobs as the company winds down its operations after six decades. Liquidation proceedings have been officially filed, which you can read in a nice PDF form.
Toys R Us filed bankruptcy six months ago because it has struggled to pay down nearly $8 billion in debt — much of it dating back to a 2005 leveraged buyout — and has had trouble finding a buyer. Reports were coming in earlier this week that the company has stopped payment to its suppliers, which are some of the biggest toy makers in the world.
There is no word on how long it will take to close every store, or if/when liquidations and sales would occur at each location, but according to The Washington Post, their source said that the company told U.S. employees that closures would likely occur over time, and not all at once.
Toys R Us, based in Wayne, N.J., has been struggling for years to pay down billions of dollars in debt as competitors like Amazon, Walmart and Target win over an increasingly larger piece of the toy market. Its bankruptcy filing last year cited $7.9 billion in debt against $6.6 billion in assets. The company said it has more than 100,000 creditors, the largest of which are Bank of New York (owed $208 million), Mattel ($136 million) and Hasbro ($59 million).
Now the question becomes, how does this affect the toy industry as a whole? Could we be seeing the start of the downfall of the toy industry? Or is this just a natural progression to a different, lower cost solution like Amazon and Walmart? Is Amazon and Walmart ready to take up the slack with the loss of Toys R Us, by increasing store space for toys? It seems we have been seeing a decrease in allotted toy space at Walmart over the past few years.
As a collector of DC Comics merchandise, it has been getting harder and harder to find DC Multiverse figures and other DC related toys at Walmart. Maybe this will help put more product on the shelves.
In any case, this is a sad day for the toy industry, and a sad day for those with fond memories of the place where a kid could be a kid…
Here is the official statement from the company:
WAYNE, NJ – March 15, 2017 – Toys“R”Us, Inc. today announced that it has filed a motion seeking Bankruptcy Court approval to begin the process of conducting an orderly wind-down of its U.S. business and liquidation of inventory in all 735 of the Company’s U.S. stores, including stores in Puerto Rico. Toys“R”Us will provide more details about the plans for the liquidation of its U.S. stores and going out of business sales in the near term.
Toys“R”Us also announced that it is pursuing a going concern reorganization and a sale process for its Canadian and international operations in Asia and Central Europe, including Germany, Austria and Switzerland. The Company’s international operations in Australia, France, Poland, Portugal and Spain are considering their options in light of this announcement, including potential sale processes in their respective markets. The Company’s stores in all these international markets are currently open and serving customers.
In connection with the sale process, the motion the Company filed with the Bankruptcy Court included bidding procedures for the Canadian operations. The Company also disclosed that it is engaged in discussions with certain interested parties for a transaction that could combine up to 200 of the top performing U.S. stores with its Canadian operations. While discussions continue on this potential transaction, Toys“R”Us is seeking court approval to implement the liquidation of inventory in all the U.S. stores, subject to a right to recall any stores included in the proposed Canadian transaction.
The previously announced administration of the UK business continues.
Dave Brandon, Chairman and Chief Executive Officer, said, “I am very disappointed with the result, but we no longer have the financial support to continue the Company’s U.S. operations. We are therefore implementing an orderly process to shutter our U.S. operations and will pursue going concern sales or reorganizations of certain of our international businesses, while our other international businesses consider their options.”
Brandon continued, “There are many people and organizations who have remained in our corner every step along the way. I want to thank our extraordinary team members who helped build Toys“R”Us into a global brand. I also want to express my appreciation for my colleagues on our board who have continued to provide support to sustain the brand and our operations throughout the restructuring process. I would also like to thank our vendors who we owe a great deal of gratitude to for their decades of support. This is a profoundly sad day for us as well as the millions of kids and families who we have served for the past 70 years.”
The Company and its advisors are working to minimize the impact of the U.S. liquidation on the Canadian and other international markets. As part of these efforts, the Company is implementing a transition services arrangement for the next 60 days and is developing plans for a potential shared service function to support the international operations going forward.
Additional information regarding the Company’s restructuring process can be obtained by calling the Company’s Information Hotline, toll-free in the U.S. and Canada at (844) 794-3476, or sending an email to toysrusinfo@PrimeClerk.com. Court filings and other documents related to the court-supervised process in the U.S. are available on a separate website administered by the Company’s claims agent, Prime Clerk, at https://cases.primeclerk.com/toysrus.
Kirkland & Ellis LLP is serving as principal legal counsel to Toys“R”Us, Alvarez & Marsal is serving as restructuring advisor and Lazard is serving as financial advisor.