Bankruptcy, the final destination for Toys R Us

Toys “R” Us announced late Monday night that it filed for Chapter 11 bankruptcy, though the company’s leadership assured customers its 1,600 stores around the world would continue to operate normally. The company, once America’s powerhouse of toys, has been struggling for years even as the toy industry grew.

Instead, it plans to restructure the $5 billion of long-term debt with which the company is saddled in hopes of keeping it afloat in a marketplace that has vastly changed with increased competition from both big box stores such as Walmart and Target, and online retailers such as Amazon.

Toys 'R' Us filed the petition in the US Bankruptcy Court for the Eastern District of Virginia in Richmond, Virginia. 
The company has $4.9 billion in debt with US$400 million in interest payments due in 2018 and another $1.7 billion due the following year.

The move casts doubt over the future of its approximately 1,600 outlets and 64,000 employees, and comes just as the US market gears up for the crucial holiday shopping season, during which company’s like Toys ‘R’ Us generate a large proportion of their annual sales.

CEO Dave Brandon called the filing the “dawn of a new era” in a news release.

“We expect that the financial constraints that have held us back will be addressed in a lasting and effective way,” Chief Executive Dave Brandon said.

“Together with our investors, our objective is to work with our debtholders and other creditors to restructure the $5bn of long-term debt on our balance sheet.”

The company’s Canadian arm will seek protection in separate proceedings, the group said in a statement.

Toys ‘R’ Us dates back to 1948 when Charles Lazarus opened Children’s Bargain Town, a baby-furniture store. Two years later he started selling toys, according before opening the first Toys “R” Us branded shop in 1957. 

The company is headquartered in Wayne, New Jersey. Outside of the US, its biggest presence is in Japan and China, followed by the UK.