Toys ‘R’ Us will sell or close all of its US stores in coming months.
The toy store chain, which has roughly 33,000 full- and part-time US employees, was already in the process of closing one-fifth of its stores as part of efforts to emerge from one of the largest ever bankruptcies by a specialty retailer.
Toys ‘R’ Us in Asia, a joint venture with the Fung Group, had previously said it continues to trade unaffected by the US company’s problems. A partial float of the Asian business is reportedly being discussed as a means of reducing the parent company’s debt.
Inside Retail has contacted Fung Group, which owns approximately 15 per cent of the toy retailer’s APAC arm.
The announcement was made to workers by chief executive David Brandon at the toy-store chain’s Wayne, New Jersey headquarters, according to the Wall Street Journal.
The closure is a blow to generations of consumers and hundreds of toy makers that sold their products at the chain’s 885 U.S. locations, including Barbie maker Mattel, board game company Hasbro and other large vendors such as Lego.
Efforts collapsed this month after lenders decided, absent a clear reorganisation plan, they could recover more in a liquidation, closing stores and raising money from merchandise sales, sources said.
The retailer is likely to liquidate in France, Spain, Poland and Australia, Brandon said, according the newspaper.
He added that Toys ‘R’ Us also planned to sell operations in Canada, Central Europe and Asia.
Toys ‘R’ Us is trying to package its Canadian business with 200 US stores and find a buyer, the CEO said, according to the Journal.
According to Neil Saunders, managing director of GlobalData Retail, the liquidation of Toys ‘R’ Us is the unfortunate but inevitable conclusion of a retailer that lost its way and forgot core retail competencies.
“Even during recent store closeouts, Toys ‘R’ Us failed to create any sense of excitement,” he said.
“Moreover, its so-called heavy discounts remained well above the standard prices of many rivals like Amazon and Walmart. Arguably, if Toys ‘R’ Us can’t successfully execute a closeout and stimulate interest, then it has little to no chance of trading under normalised conditions.”
Saunders said management may blame suppliers and competitors for its demise, but the primary responsibility lies with poor decisions.
“ As the competitive dynamics of the toy market intensified, management failed to respond and evolve. As such, the brand lost relevance, customers and ultimately sales.”
“Admittedly, the leveraged buyout which burdened the company with debt reduced the room for maneuver and left Toys ‘R’ Us vulnerable. Questions should be asked as to the wisdom of this particular financial transaction which weakened the sustainability of the company.
“The main tragedy of liquidation will be the extensive loss of jobs. In our view, those on the shop-floor have been badly let down by management and those doing financial deals.”
Toys ‘R’ Us Australia says it is business as usual at its 39 stores despite the US retail giant’s apparent collapse at home and elsewhere.
A spokesperson says all local stores and services including gift cards, loyalty programs, lay-by and returns are unchanged.
“Toys ‘R’ Us Australia stores are open for business and continue to serve customers,” the spokesperson said.
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