Yesterday, retail toy giant Toys R Us filed for Chapter 11 bankruptcy protection in federal court. Citing increased competition in the rapidly-changing retail market and facing a $400 million debt payment by year’s end, this move appears to be a last-ditch effort to keep stores open. However, with the holiday shopping season merely weeks away, anxious shoppers are worried about what this all means.
Perfect timing helped Toys R Us grow from a single, tiny store into an international powerhouse over the course of 69 years.
Now it becomes the victim of imperfect timing, filing for Chapter 11 Monday ahead of the critical holiday toy-buying season. The filing, and the debt that came with it, was years in the making.
The company got its start selling cribs and carriages just as the baby boom was about to explode. It expanded into toys as those babies grew and it realized dolls and trucks produced more repeat business than baby furniture. It opened the first toy superstores just as the age of hot toys fueled by TV ads was dawning.But the company that billed itself as “the center of the toy universe” found itself behind the times in the digital age and challenged by a retail world that is playing by a whole new set of rules.
No one expects Toys R Us to disappear. But most experts agree it will need radical changes to survive. And in a world where Walmart, Target, Amazon and even drugstores and discount fashion stores like T.J. Maxx are selling toys, any missteps could help those competitors gain an edge.
Toys R Us faces the same core problem that has plagued other retailers that have filed for bankruptcy recently: Too many stores and too many large stores, said Jeff Gleit, a bankruptcy partner at New York law firm Sullivan & Worcester, who has worked on major retail restructurings. While Toys R Us could do an out-of-court restructuring and reach an agreement with its bondholders, bankruptcy may be the only solution that lets it shed excess stores, Gleit said.
BE PREPARED FOR SOME STORES TO CLOSE AND WATCH FOR THOSE CLEARACE DEALS!!
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