Despite Billions of Dollars in Debt, Toys ’R’ Us Lenders Seek to Reboot the Brand

After filing for bankruptcy in June, Toys ’R’ Us announced its doors may be reopening—still without promise to pay its former employees and the small promise of paying a mere 22 cents on the dollar it owed creditors after the company filed for bankruptcy. Lenders plan to sell the intellectual property of Toys ’R’ Us instead of continuing with a bankruptcy auction, which lenders are hoping will lead to a reboot of the chain.

According to National Real Estate Investor, Toys ’R’ Us lenders plan to open stores globally, and they are working with potential partners to fund the projects as they develop new ways to rebrand one of the most iconic children’s stores.

But with creditors already receiving so little back from the company and with about 30,000 employees still without their promised severance packages, Toys ’R’ Us’ comeback may not prove to be fruitful. Before filing for bankruptcy, Toys ‘R’ Us was more than $5 billion in debt. It’s unclear whether a rebrand can save the company once more, but credit managers should continue to remain cautious on whether to extend credit to the future Toys ’R’ Us.

—Christie Citranglo, editorial associate

International Monetary Fund, World Bank Bring Global Financial System Risks to Light

The International Monetary Fund (IMF) and the World Bank are gathering this week to discuss the state of the global financial system, which has many worried because of emerging markets and heightened trade tensions. The meetings are held in Bali and include a review of current risks to the world’s financial well-being.

On Oct. 10, Reuters reported “easy financial conditions,” such as high debt levels and “stretched” asset valuations, are fueling economists’ concerns, following IMF’s report that tightening financial conditions have caused near-term risks to increase. While economies may not feel pressure at the moment, IMF capital markets director Tobias Adrian said in the article that high inflation could cause interest rates to skyrocket when least expected.

“In the report, the IMF said economic growth appears to have peaked in some major economies while the gap between advanced countries and emerging markets was widening,” Reuters states. “The IMF on [Oct. 9] cut its global growth forecasts due to an escalating U.S.-China trade war and growing financial strains on emerging markets.”

Economic conditions in the U.S. are holding strong, despite an interest rate increase by the Federal Reserve in September and another expected to follow in December. Meanwhile, slow conditions are seen in the euro area and Japan, Reuters noted, with moderate conditions in China—a status that could change depending on the country’s trade dispute with the U.S. The IMF recommends global regulators “keep in place measures” enacted during the financial crisis a decade ago as a precaution.

—Andrew Michaels, editorial associate

September’s Strong Service Sector Hits 21-Year High

September was good to the U.S. service sector, where activity reached a two-decade high as the economy begins the fourth quarter. The Institute for Supply Management’s (ISM) non-manufacturing activity index indicated more hiring was behind last month’s results that were last seen in August 1997.

Following Federal Reserve Chairman Jerome Powell’s remarks earlier this week that the economic outlook is “remarkably positive” as well as last week’s interest rate hike, Reuters reported economists anticipate yet another rate increase in December, the fourth hike in 2018. Economists said in the Oct. 3 article they anticipate ongoing growth; however, there are still concerns among companies in the service sector, including “capacity, logistics and the uncertainty with global trade.”

“Industries are bumping against capacity constraints in a robust economy and tightening labor market conditions,” Reuters states. “Companies are increasingly reporting difficulties finding qualified workers to meet demand, leading to delays in delivering goods and services.”

The ISM findings are complementary with NACM’s Credit Managers’ Index (CMI) September report, showing an overall boost in favorables such as sales and dollar collections. September typically has “quite a lot of activity in the service sector,” said NACM Economist Chris Kuehl, Ph.D., who noted that retail usually thrives the most, while construction dwindles in the colder months. According to CMI reports since 2015, the service sector experienced growth three out of five times during September.

“The movement is subtle to be sure, but at least it is heading in the right direction, and for two
months in a row,” Kuehl said in his comparison between the September 2018 and September 2017 CMI reports. “Dare we hope for a longer trend?”

—Andrew Michaels, editorial associate

Retailers Struggling to Hire for the Holidays

The holiday shopping season is approaching quickly as shoppers will soon begin flocking to department stores and small businesses in the coming months. A busy shopping season calls for more retail hiring; however, CNBC reports not all retailers will successfully fill their vacant positions. Demands for higher wages lure some employees away from low-paying jobs, while those who remain are left to pick up the slack.

On Oct. 1, the news outlet shared findings from global consulting group Korn Ferry that first looked back to the 2017 holiday season when 23% of retailers were unable to reach their desired number of temporary hires—expectations that will likely worsen this year. While nearly 70% of the participating 20 major U.S. retailers want to hire similar employee numbers, CNBC states, just over 60% are instead giving permanent employees more hours to close the gap.

“There are more jobs out there than there are people looking for them. ... It's a hustle to find the talent,” Korn Ferry Senior Partner Craig Rowley said in the article. “Retailers are asking their existing employees if they can work more because they're already trained. This year more than ever we're seeing employers getting workers to work more hours.”

Rowley also told CNBC that hiring is the main speed bump for the 2018 shopping season, sales being troubling last year.

—Andrew Michaels, editorial associate