Private label supplier to Toys R Us was left with $500K of inventory
- A bankruptcy court has ruled Huffy can sell private-label goods it manufactured for Toys R Us, as long as the supplier removes any Toys R Us branded trademarks or any other intellectual property.
- Huffy supplied the retailer with Rallye and Avigo brand products "which are Toys “R” Us store brand private label products that are produced solely for and sold only to Debtor in connection with Debtor’s private label business," according to a court motion Huffy filed in April.
- After Toys R Us announced its plans to liquidate, it canceled several purchase orders with Huffy, but many of the products had already been produced. Huffy said it holds more than $500,000 in finished goods with the Rallye and Avigo names.
Many of Toys R Us' suppliers took a hit when the retailer shut its doors. Shortly after the retailer's liquidation announcement, Mattel closed its New York Office and laid off 100 employees. Hasbro reported millions in net losses in its first quarter of 2018, blaming about half of that loss on Toys R Us' liquidation.
Fortunately for the two suppliers, retailers are eagerly moving to swoop in and pick up the pieces left behind by Toys R Us, giving toy vendors outlets for their products. In addition, toy sales are growing on e-commerce marketplaces. Amazon's U.S. toy sales in 2017 reached $4.5 billion, according to an analysis from One Click Retail.
But for suppliers making private label goods exclusively for a retailer — as Huffy was doing for Toys R Us — the consequences are much greater. While Huffy can sell its Huffy-branded products through other retailers, it wasn't able to immediately sell the Rallye and Avigo products.
The products manufactured but not sent to Toys R Us due to canceled purchase orders have created stockpiles of inventory for the supplier.
"Huffy is incurring otherwise avoidable costs and expenses including, but not limited to, approximately $575.00 per day in storage costs for goods that are fit for sale," the company wrote in its court filing.
While the court's decision to allow Huffy to sell the goods under particular conditions will help decrease inventory, the supplier has already suffered "substantial hardship" from the fallout of Toys R Us' liquidation.
Huffy said it was "forced to hold perfectly merchantable bicycles and other goods in storage during the height of the bicycle spring selling season," the court motion stated.
- Retail Dive How Toys R Us' bankruptcy hopes came crashing down
- Supply Chain Dive Toys R Us liquidation is a test of supplier resilience
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