If you love walking the aisles for conversion ideas, and cheap tanks to kit bash at your local Toys “R” Us, those days may soon come to an end.
The big box chain toy store seeks financial protection from its immense debt due to slumping sales, especially in the previous holiday season.
Toys “R” Us, which has been around since 1948, filed for Chapter 11 Bankruptcy protection in the U.S. and will be seeking similar protections in Canada. The company is using the bankruptcy procedures to come to terms with debt holders and creditors, as well as restructure its business to compete more with online retail stores. This announcement comes prior to its busiest and most profitable time of the year.
Chapter 11 bankruptcy protection involves restructuring and reorganization of the business in order to work better with debtors and is used by businesses when they are unable to pay their creditors through current business practices. The business is able to run as normal and remain in control of the business, rather than having assets seized and business decisions made by their creditors. Toys “R” Us is using the Chapter 11 proceedings to rework its balance sheets and deal with the $5+ billion of debt, $400 million of which was coming due next year. According to the company, they will be using the restructuring process to take care of long-term debt as well as reinvest in the business itself.
Toys “R” Us put out several releases and FAQs for customers, reassuring them about different aspects of the business. For now, all stores will remain open and operate as usual, both brick and mortar as well as their new online platforms. The company hopes this will not affect customers and customer experiences, continuing their different loyalty programs as usual as well as honoring their return policies. They do not expect problems with stock, interruptions to their typical sales and promotions, or interruptions to their “R” Us Credit Card. You can read more from the Customer FAQ as well as the Customer Message, released by Toys “R” Us via their website.
The company is not currently planning on closing physical stores, though it could be possible in the future. As of now, all employees still have jobs, especially during the holiday season. As the restructuring occurs and the company is able to re-balance its financial sheets, this may change in the future. The company still expects to have hot holiday toys on the shelves to sell and does not expect a supply disruption to their stocks. As they have launched their new websites for both the Toys “R” Us and Babies “R” Us brands, hoping to have better results online against other online retailers.
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