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It’s Official: Toys “R” Us has filed for Chapter 11 Bankruptcy Protection…


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We all knew it was coming, and as I pointed out earlier this month, we know who’s largely to blame: Iconic toy retailer Toys “R” Us has filed for Chapter 11 bankruptcy protection in the United States, and will soon take similar steps (CCAA) in Canada. In the later hours of September 18, 2017, Toys “R” Us made it official, voluntarily filing for relief in the U.S. Bankruptcy Court for the Eastern District of Virginia in Richmond, and sharing the news via press release. It’s important to note that while this news is serious, companies restructure and emerge from Chapter 11 all the time, though the companies with ownership stake in Toys “R” Us – particularly Bain Capital – leave much to be desired.

A Statement from Dave Brandon, Chairman and Chief Executive Officer: “Today marks the dawn of a new era at Toys“R”Us where we expect that the financial constraints that have held us back will be addressed in a lasting and effective way. Together with our investors, our objective is to work with our debtholders and other creditors to restructure the $5 billion of long-term debt on our balance sheet, which will provide us with greater financial flexibility to invest in our business, continue to improve the customer experience in our physical stores and online, and strengthen our competitive position in an increasingly challenging and rapidly changing retail marketplace worldwide. We are confident that these are the right steps to ensure that the iconic Toys“R”Us and Babies“R”Us brands live on for many generations.”

He continued, “As the holiday season ramps up, our physical and web stores are open for business, and our team members around the world look forward to continuing to put huge smiles on children’s faces. We thank our vendors for their ongoing support through this important season and beyond. We also appreciate the strong support our investors have provided over time and the constructive role they are playing in this process that will allow us to create a brighter future for our company. And as importantly, we thank our team members in advance for their hard work and dedication to serving the millions of customers who will shop with us this holiday.”

As I discussed in my earlier feature about the woes at Geoffrey’s house, much of the debt hole they’ve been unable to dig out of has little to do with the sale of toys, but much to do with being strapped due to a leveraged buyout, something that Bloomberg further details today. 

Going even further to how out-of-whack this all is (predatory capitalism at work), the official announcement from Toys “R” Us specifically notes: “The Company’s approximately 1,600 Toys“R”Us and Babies“R”Us stores around the world – the vast majority of which are profitable – are continuing to operate as usual, providing customers with great service and a curated assortment of merchandise in the toy and baby categories.” If “the vast majority are profitable,” that’s a great thing in the battle to move forward, but shows you just how bad the behind-the-scenes financials are.

For international readers, please note that Toys “R” Us operations outside of the U.S. and Canada, including its approximately 255 licensed stores and joint venture partnership in Asia, which are separate entities, are not part of the Chapter 11 filing and CCAA proceedings. Readers in the U.S. and Canada can continue to shop  www.toysrus.com and www.babiesrus.com. Customers should expect the Company’s loyalty programs, including its Rewards“R”Us, Geoffrey’s Birthday List and Babies“R”Us Registry, to continue as normal.

News of the Toys “R” Us filing is already having a ripple effect through the toy industry as we move into the most important season of the year, and that’s meant that some stock prices have taken a few punches tonight for the likes of Hasbro, Mattel, etc. 

My fingers are crossed that Toys “R” Us can quickly move forward with their plan “to restructure its outstanding debt and establish a sustainable capital structure that will enable it to invest in long-term growth and fuel its aspirations to bring play to kids everywhere and be a best friend to parents.”

Stay tuned…

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