- Toys R Us has moved to wind down its U.S. operations. On Thursday, the toy retailer filed a motion in federal bankruptcy court outlining a plan to liquidate its domestic operations. The liquidation could leave some 30,000 store and distribution employees without jobs.
- Attorneys for Toys R Us noted in a court filing that the company's plan does not "[preclude] the prospect of any going concern option for U.S. stores." The retailer has developed a "potentially value-maximizing transaction" that would combine the company's 200 top-performing stores with a sale of its Canadian operations, according to the filing. Even so, Toys R Us said it must move forward quickly with the U.S. wind down while pursuing, separately, a deal for its Canadian business.
- In the filing, Toys R Us said that fourth quarter earnings came in under targets set by its bankruptcy loan — targets it considered "conservative." To keep remaining stores open until the 2018 holiday season would have required an investment of "hundreds of millions of dollars," according to the filing. Without new capital or a buyer, the retailer was set to run out of money by May. Meanwhile, the company's creditors saw liquidation as the most viable path to repayment, attorneys for Toys R Us said.
Both were big box specialty retailers that sputtered for some time before filing for bankruptcy. Both entered Chapter 11 with plans to turnaround their businesses and position them to better compete. Circuit City, like Toys R Us, filed more or less unexpectedly, just ahead of the holidays.
Both Circuit City's and Sports Authority's plans failed, and each retailer ended up liquidating.
Now the same appears to be the case with Toys R Us, though there is still a chance the retailer could salvage a couple hundred stores.
Saddled with around $5 billion of debt from a leveraged buyout more than a decade ago, Toys R Us has been sliding in the toy market for years. This holiday season it was flanked by mass merchant competitors — namely Walmart, Target and Amazon, who have been stealing toy share for years — which beat the company in online pricing and strategy during the period.
After years of cost cuts, the stores were understaffed and often poorly merchandised. The retailer, as it paid some $400 million a year in interest, also failed to invest in technology and was using outdated omnichannel infrastructure, which led to numerous problems fulfilling online orders during the holidays, as Retail Dive previously reported.
As Toys R Us begins to wind down its operations, there are still unanswered questions: Will some U.S. stores survive? Who will operate them? What will happen to the company's domestic intellectual property? How will toy makers respond to the loss of arguably their most important retail partner?
Regardless of the answers, it seems all but certain the decades-old toy seller, as it is currently constructed, is finished.