Reports: Toys R Us Preparing to Liquidate U.S. Operations

Bloomberg has reported that Toys R Us is planning a complete liquidation of its U.S. operations that are now under bankrupt protection as it has not located a buyer or reached a restructuring deal for its debt with lenders.

Because of that, Toys R Us might close all 800 of its stores in the U.S. which would mean thousands of employees would lose their jobs. According to the report a source said the situation was still fluid but that a shutdown of its U.S. stores was becoming more and more likely.

In a separate report, a source said that an official announcement is possible by Monday as the company has a hearing in bankruptcy court in Virginia.

In January, the toy retailer announced that it would close 180 of its stores, following a poor holiday shopping season. In February, the company, based in New Jersey, said it would likely be closing 200 more stores or close to half its total.

Toys R Us is facing more trouble overseas as well as the business entered into administration in the UK, which is a process that is similar to U.S. bankruptcy filings. The company had previously attempted but failed to find someone to buy the full UK operations, where the toy retailer has over 100 stores, includes its locations Babies R Us, and has a workforce that is estimated to be over 3,000.

According to one of the published reports, the Toys R Us U.S. division had entered into Chapter 11 bankruptcy protection during September of last year, but had obtained a loan of more than $3.1 billion to keep its stores open during its attempt to turn the business around with a business model that was much leaner than before.

Nevertheless, the toy retailer quickly saw poorer sales than it had expected during the all-important holiday season amidst a much more intense level of competition from not only its traditional competitors, but from more retailers online and much less traffic entering its brick and mortar locations.

For the last few years, shopping malls have been hit hard due to many consumers shifting their buying habits and purchasing much more online in the comfort of their own home. That has caused many of the stores that populated many of the malls to see a drastic drop in sales, such as Toys R Us.

Leave a Reply