In a statement released late Monday night, the Toys "R" U.S. explained that they're filing for bankruptcy protection to "restructure its outstanding debt," in hopes that it will lead to more sustained long-term growth for the retail company.
Ten days later, almost all the company's vendors refused to ship products without cash in advance, forcing Toys "R" Us to scramble to raise $1 billion for its nervous suppliers, according to court filings.
The retailer of toys and juvenile products knows its principal problems include high debts and loss of sales because of competitors.
With the upcoming holiday season a critical time for retailers, Toys R Us is still "well stocked" and prepared, and they are also gearing up for some in-store events. The company's annual sales have fallen for six years in a row, and last year it reported a loss of $29 million.
Toys, and Toys R Us in general, play a huge role molding our sense of self.
"We believe a top priority of the filing was to continue access to product from key vendors such as Mattel and Hasbro during the critical Christmas/holiday season while reducing real estate related debt", Wells Fargo Senior Analyst Timonthy Conder wrote in a Tuesday note. The store had been open for just over two years. "Most importantly - It's business as usual!" I understand the sentiment; I grew up begging my parents to take me to Toys R Us, bought my first Sega Genesis games there as a teenager, worked in the Toys R Us stockroom in graduate school (it was like a giant game of Tetris), and occasionally I'd buy collectibles there as an adult.
"The past decade has seen a dramatic change in the domestic toy market with new channels, increased competition, and new technology all having a deleterious impact on the sector and traditional toy stores".
So what can Toys "R" Us do now? It has been revamping its baby registry and loyalty program, both of which can help it catch and keep new customers.
No. Toys "R" Us fully expecta to continue honoring return policies and warranties. Not only has Toys'R'Us been unable to handle the debt, the retailer hasn't been able to commit any money to efforts that might make them more competitive.