Toys R Us has an opportunity to sell much its overseas business, thanks to several bids of more than $1 billion for an 85% stake in its Asia operations, Reuters reports. Previous reports indicated that the Fung Group, which owns a stake in the joint venture for the unit, is set to bid on the remaining stake.
The bankrupt company, which is winding down its United Kingdom and U.S. operations, is also in "advance discussions" with a party interested in its Central European business, according to Reuters, which quotes statements by the company’s attorneys in bankruptcy court.
Toys R Us is still trying to save 200 of its top-performing domestic stores as part of a deal for its Canadian business. Meanwhile, liquidation sales and real estate auctions are ongoing after the company announced plans to wind down its entire U.S. business in March. The toy retailer's attorney said in court that domestic liquidation sales were going better than expected, generating more money to repay creditors, according to the Reuters report.
Creditors are getting some good news in what has been a remarkable collapse of a once-iconic toy retailer.
As Toys R Us unloads assets to repay creditors, several vendors, including Crayola, have objected in court to how the liquidation proceeds will be divvied up. Crayola, specifically, alleged that Toys R Us owes it millions of dollars for shipments, which accelerated in January and February, when the toy retailer knew it was on the path to liquidation.
The collapse of the retailer might have been unexpected to much of the world, but it comes after years of underinvestment. For years Toys R Us — as it paid hundreds of millions of dollars a year on its $5 billion in debt obligations, leftover from its leveraged buyout in 2005 — failed to close the gap with rivals and successfully reposition itself. Current and former employees have told Retail Dive that inadequate IT infrastructure, as one example of underinvestment, led to disastrous missteps over the holidays, which saw a steep sales decline as customer orders went unfulfilled.
It didn't help that the company declared bankruptcy at the dawn of the holidays, pretty much the worst moment for a retailer that makes 40% of its sales in the fourth quarter. The filing temporarily stalled its supply chain and spooked customers who otherwise likely would have bought more gift cards, the retailer's attorneys have said in court filings.
The retailer shut down its online operations earlier this month, sending customers looking for liquidation-related deals to physical stores. Many shoppers have complained that discounts of only 5% to 10% were to be had throughout the retailer's full national Toys R Us and Babies R Us store portfolios, according to Time Inc.'s Money Magazine.