Call for Free Consultation 512-458-4138

Toys ‘R’ Us Files Chapter 11 Bankruptcy

hear no seen no speak noBig box retailers are struggling. Some do not hear it, some do not see it, and some do not speak about it. It was speculated that global toy retailer Toys ‘R’ Us could end up filing for bankruptcy before the end of the year. The Wall Street Journal reports Toys ‘R’ Us suppliers are tightening credit terms and even demanding cash on delivery for some shipments.

The speculation is over. Toys ‘R’ Us has filed for Chapter 11 Bankruptcy protection for its U.S. operations. The case was filed in Richmond, VA. Chapter 11 bankruptcy protection will be used to negotiate terms with their creditors and restructure its almost $5 billion in debt.

Toys ‘R’ Us has grown from a single store to over 1,600 stores in its 69-year history. The company started selling strollers and cribs as World War II veterans returned home and started families. The company started focusing on toys in the late 1950’s as TV-fueled demand for the latest must-have toy grew. It has chosen Chapter 11 bankruptcy protection in an attempt to stay open and reorganize. Existing stores are expected to remain open.

The immense pressure on brick and mortar retailers can be seen in the number of big-box retailers that have reduced stores or closed altogether. Sports Authority, Golfsmith, Payless ShoeSource, and Gander Mountain are just four big-box retailers to file bankruptcy or close in the last 24 months. The growth of mass merchants Walmart and Target, along with Amazon continue to pressure specialized big box retailers.

Baby and gift registries at Toys ‘R’ Us stores are to remain up and running, along with the Toys ‘R’ Us credit card. Gift cards will continue to be honored as usual as will return policies and warranties.

It has been reported that Toys ‘R’ Us has interest payments on $400 million of its debt coming due in 2018 with an additional $1.7 billion due in 2019. As part of the restructuring underperforming stores will close and others will be remade into interactive spaces. Going forward they also plan to create more side-by-side locations of Toys ‘R Us and Babies ‘R’ Us.

In the two main categories, baby goods and toys, Amazon’s sales are more than double Toys ‘R’ Us online sales. The major toy companies want Toys ‘R’ Us to survive and often give Toys ‘R’ Us the first shot on exclusive toys. So you will still have a chance to experience the special event that is Black Friday at your local Toys ‘R’ Us.

1000 Heritage Center Cir, #102
Round Rock, Texas 78664
ph: 512-458-4138
fax: 512-458-4213
Copyright 2017 Law Office of Nels C. Hansen PC
All rights reserved. Disclaimer
Posted September 20, 2017