Wayne, N.J. — Toys ‘R’ Us is taking the next step in what the Wayne-based retailer is calling an “orderly wind down” of it’s U.S. business.
In a U.S. Bankruptcy Court filing early Thursday morning, Toys ‘R’ Us is requesting approval to begin the liquidation of inventory in all 735 of its remaining stores across the country, including stores in Puerto Rico.
The closures threaten up to 33,000 American jobs in the coming months, according to the Wall Street Journal.
“I am very disappointed with the result, but we no longer have the financial support to continue the company’s U.S. operations,” said David Brandon, chairman and CEO of Toys ‘R’ Us, in an official statement.
In January, the toy chain announced plans to shutter up to 182 underperforming stores, including those under the Babies ‘R’ Us banner, as part of its restructuring efforts to revive business. The 70-year-old retailer filed for Chapter 11 Bankruptcy last September.
Toys ‘R’ Us was facing $5 billion in debt, largely stemming from a $6.6 billion buyout in 2005 led by KKR & Co. LP, Bain Capital LP and Vornado Realty Trust. Continued debt, combined with poor holiday sales, forced the retailer’s latest move. For Christmas 2017, earnings were about half of what the company might expect in a normal year, according to USA Today.
The company’s struggles have directly impacted toy makers, including Hasbro, whose brands include Nerf, Play-Doh and board games such as Monopoly and Scrabble. In its full-year 2017 financial results, the Rhode Island-based company cited bad debt stemming from the Toys ‘R’ Us Chapter 11 filing last fall for its 2 percent dip in operating profits for its business in the U.S. and Canada.
Mattel, best known for its Barbie and American Girl line of dolls, also cited the Toys ‘R’ Us bankruptcy as contributing to its 17 percent decrease in North American sales in 2017 compared to 2016.
The company said in the filing it is considering options that could combine up to 200 of the top performing U.S. stores with its Canadian operations in a potential sell-off. If approved, those U.S. stores would not be subject to the company’s inventory liquidation.
The filing included bidding procedures for its Canadian operations, which Toys ‘R’ Us is looking to unload in addition to its operations in Asia and Central Europe, including Germany, Austria and Switzerland.
The retailer’s international operations in Australia, France, Poland, Portugal and Spain are considering their options in light of the announcement, including potential sale processes in their respective markets.
“There are many people and organizations who have remained in our corner every step along the way,” said Brandon. “This is a profoundly sad day for us as well as the millions of kids and families who we have served for the past 70 years.”
Kirkland & Ellis LLP is serving as principal legal counsel to Toys ‘R’ Us. Alvarez & Marsal is serving as restructuring advisor and Lazard is serving as financial advisor.
— Camren Skelton and John Nelson