Late yesterday, major retailer Toys ‘R’ Us announced that it and certain of its U.S. subsidiaries and its Canadian subsidiary filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Eastern District of Virginia in Richmond. The filing excludes the company’s operations outside of the U.S. and Canada, which includes about 255 stores in Asia. The company’s approximately 1,600 Toys ‘R’ Us and Babies ‘R’ Us stores around the world, the majority of which are profitable, will continue to operate as usual, the company said in a press release.
“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,” said Dave Brandon, chairman and chief executive officer, in the release. “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.”
Toys ‘R’ Us has struggled amid the rise of discounters such as Wal-Mart and Target, and especially Amazon.com, the Wall Street Journal reported. Most Toys ‘R’ Us stores are expected to be open during the holidays, and the company will use $3 billion in bankruptcy financing to continue to finance its operations, the Journal said. More than 20 retailers, including RadioShack and Payless Shoe Source, have filed for bankruptcy this year.
With assets of $6.9 billion, this marks the second-largest retail bankruptcy after Kmart, Reuters reported. Toys ‘R’ Us is the second-largest toy seller in the United States behind Amazon, the news agency added.
– Adam Fusco, associate editor