The Strategist

Toys R Us lost the competition to online retail

03/15/2018 - 13:45

The American children's items and toys chain Toys R Us announced that it is going to liquidate its business in the United States. Thus, the remaining 735 stores Toys R Us will be closed, and more than 30 thousand employees of the company will lose their jobs. Toys R Us filed for bankruptcy in September last year; since then it has not been able to find a buyer for its business or to restructure debts.

US retailer Toys R Us, specializing in the sale of toys and products for children, is closing the last 735 stores in the US. On Thursday, a company that has existed since 1948, sent a statement to the US bankruptcy court that it is going to liquidate its business in the United States. Recall, in September last year, Toys R Us applied for protection from creditors, then its debts reached $ 4.9 billion. After that Toys R Us several times announced the closure of all new stores. Now the company, which never managed to find a buyer or restructure debts, will have to completely liquidate its business.
"This is a very sad day for us and for the millions of children and families we have served in the last 70 years," Dave Brandon, the company's CEO, said in this regard. Toys R Us is discussing with interested parties the opportunity to merge the 200 most profitable stores in the US with its Canadian unit, which it is going to sell. As for stores in Asia and Europe, the company is also going to conduct their reorganization and try to find buyers for assets.
Once the stores are closed, about 33 thousand people will remain without work. Liquidation of Toys R Us is one of the largest such cases in the US in recent years. Last year, the Sports Authority store stopped its activity; more than 460 shops were closed then, and about 14.5 thousand people lost their jobs.
Last week, when first reports of a possible elimination of Toys R Us occurred, the shares of such major toy manufacturers as Mattel and Hasbro fell, while Toys R Us accounted for about 10% of the proceeds of both companies.
Among the problems faced by Toys R Us is the growing competition from online retailers, for example, Amazon, as well as increased popularity among children gadgets and computer games as opposed to conventional toys. A significant part of the company's debt was formed back in 2005, when a consortium of private investment companies Bain Capital Partners, Kohlberg Kravis Roberts and Vornado Realty Trust purchased it for $ 6.6 billion with the help of a loan. Over the years, the retailer has not been able to fully pay off these obligations.