After 70 years in business, the biggest toy store there is simply won’t be anymore. Today Toys’R’Us filed papers in court to begin the immediate process of liquidating and selling all of it’s US store operations for both Toys’R’Us and Babies’R’Us.
Toys’R’Us filed for Chapter 11 Bankruptcy Protection in September of 2017 and received an influx of cash of $3.1 billion dollars to maintain business operations over the 2017 Holiday Shopping Season. Through court documents we now see just how bad this Holiday Shopping Season was for Toys’R’Us – Quarter 4 of the 2017 Fiscal Year brought in only $81 million dollars for Toys’R’Us compared to $347 million in Quarter 4 of 2016. To quote CEO David Brandon, their financial results were “worse than worst case scenario”. To remain open, Toys’R’Us would need to spend $50 million to $100 million per month which the company is incapable of doing.
The small, silver lining to this scenario is that there are potential plans for the Toys’R’Us Canada branch to outright purchase a select number of stores – possibly close to 200 – and allow them to remain open. However, until such a deal is reached, every single Toys’R’Us and Babies’R’Us store in the United States will begin the process of liquidation.
It’s a sad day for the toy industry. Toys’R’Us is estimated to make up 15% of all the total toy sales in the United States, putting huge burdens on major manufacturers like Hasbro and Mattel to find a way to make up for that change. Hasbro, in recent investor calls, has already stated plans in place currently to help minimize the overall effect and that they are confident they will come out of this mostly unscathed. Mattel on the other hand is close to filing for bankruptcy themselves, having recently suspended dividend following poor sale results in the recent quarter.
We’s sharing the following jingle by Twitter user @ChaseHolfelder in memory of the “Biggest Toy Store There Is”. Our thoughts are with the estimated 33,000 workers who will soon be out of a job. If there are any changes to the news, or Toys’R’Us Canada does end up purchasing some US stores to keep them open, we will share that with you.
It's official. @ToysRUs just announced they're closing all 800 of their U.S. stores. If you haven't lit a candle while listening to my minor-key version of their classic jingle… now is the time. #ToysRUs #RIPToysRUs #ToysRUsKid #ToysRUsKids 😭 pic.twitter.com/rsvXznPVBB
— Chase Holfelder (@chaseholfelder) March 15, 2018
The full press release is after the jump of “Read More”.
WAYNE, NJ – March 15, 2017 – Toys“R”Us, Inc. today announced that it has filed a motion seeking Bankruptcy Court approval to begin the process of conducting an orderly wind-down of its U.S. business and liquidation of inventory in all 735 of the Company’s U.S. stores, including stores in Puerto Rico. Toys“R”Us will provide more details about the plans for the liquidation of its U.S. stores and going out of business sales in the near term.
Toys“R”Us also announced that it is pursuing a going concern reorganization and a sale process for its Canadian and international operations in Asia and Central Europe, including Germany, Austria and Switzerland. The Company’s international operations in Australia, France, Poland, Portugal and Spain are considering their options in light of this announcement, including potential sale processes in their respective markets. The Company’s stores in all these international markets are currently open and serving customers.
In connection with the sale process, the motion the Company filed with the Bankruptcy Court included bidding procedures for the Canadian operations. The Company also disclosed that it is engaged in discussions with certain interested parties for a transaction that could combine up to 200 of the top performing U.S. stores with its Canadian operations. While discussions continue on this potential transaction, Toys“R”Us is seeking court approval to implement the liquidation of inventory in all the U.S. stores, subject to a right to recall any stores included in the proposed Canadian transaction.
The previously announced administration of the UK business continues.
Dave Brandon, Chairman and Chief Executive Officer, said, “I am very disappointed with the result, but we no longer have the financial support to continue the Company’s U.S. operations. We are therefore implementing an orderly process to shutter our U.S. operations and will pursue going concern sales or reorganizations of certain of our international businesses, while our other international businesses consider their options.”
Brandon continued, “There are many people and organizations who have remained in our corner every step along the way. I want to thank our extraordinary team members who helped build Toys“R”Us into a global brand. I also want to express my appreciation for my colleagues on our board who have continued to provide support to sustain the brand and our operations throughout the restructuring process. I would also like to thank our vendors who we owe a great deal of gratitude to for their decades of support. 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.”
The Company and its advisors are working to minimize the impact of the U.S. liquidation on the Canadian and other international markets. As part of these efforts, the Company is implementing a transition services arrangement for the next 60 days and is developing plans for a potential shared service function to support the international operations going forward.
Additional information regarding the Company’s restructuring process can be obtained by calling the Company’s Information Hotline, toll-free in the U.S. and Canada at (844) 794-3476, or sending an email to toysrusinfo@PrimeClerk.com. Court filings and other documents related to the court-supervised process in the U.S. are available on a separate website administered by the Company’s claims agent, Prime Clerk, at https://cases.primeclerk.com/toysrus.
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.