Toys”R”Us, Inc. confirmed Wednesday night that it’s closing all Toys”R”Us and Babies”R”Us stores in the U.S., giving up on restructuring efforts after losing the confidence of lenders and customers.
After 70 years in business, the world’s biggest toy store is closing shop in its home market, which will affect about 30,000 U.S. jobs. It has already started shutting down in the UK, affecting about 3,000 workers. Its other international operations remain open but are under review, as outlined in the press release below.
“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,” said company Chairman and CEO David Brandon.
After coming back from bankruptcy and securing $3.1 billion in financing in September, the retailer tried turning its stores into “digital playgrounds” with an augmented reality app that was announced in October, in time for the crucial holiday season selling period. Still struggling with more than $5 billion in debt from a leveraged buyout, it also announced ambitious plans to create a new customer experience, in-store and online, in the U.S.:
These investments include the renovation and modernization of Toys”R”Us® stores through improved layouts, updated lighting patterns and other areas to bring them into the next era of retail shopping. The investments will also include updating the Company’s e-commerce sites and infrastructure to better reflect its brand, promote the hottest toys and provide improved delivery capabilities so Toys”R”Us can effectively compete in the online shopping space.
Year-End Holiday Blues
In December Toys”R”Us, Inc. reported quarterly earnings and disappointing sales, noting the challenges it still faced:
“Our results for the quarter were disappointing. They not only reflect the broad competitive trends across retail, they demonstrate the continued challenges we face in both the baby and learning categories. Though we continue to see growth in our core toy category, we recognize the need for change in order to better meet customers’ ever evolving shopping preferences,” Chairman and CEO David Brandon stated.
“The financial restructuring process that we kicked off in mid-September was a critical first step, allowing us to restructure our balance sheet and make the necessary investments in the right initiatives needed to reinvent our business and deliver on our commitment to be Champions of Play for kids everywhere and a trusted resource and friend for parents around the world. This process won’t happen overnight but I am confident the steps we are taking will meaningfully improve the customer experience.”
It introduced a Price Match Promise in January, while Geoffrey the giraffe mascot continued making school visits.
— ToysRUs (@ToysRUs) March 3, 2018
The Final Days
Still, rumors swirled in the past week that it wasn’t looking good for the future of the brand, even as the company tried to reassure customers:
To our loyal customers: We’ve seen an amazing outpouring of love and support in recent days and we truly appreciate it. Our stores are open for business, ready to bring joy to children wherever we can, and to help new and expecting parents navigate raising a family.
— ToysRUs (@ToysRUs) March 9, 2018
As the Wall Street Journal noted on Wednesday, lenders were growing impatient after the disappointing holiday sales, with the loss of their support leaving the board with no choice but to call it quits.
“I have always believed that this brand and this business should exist in the U.S.,” Brandon said on an employee conference call on Wednesday. He laid part of the blame on vendors who didn’t support the retailer during the holidays and customers who shopped elsewhere, including Amazon and Walmart. They “will all live to regret what’s happening here,” Brandon said.
Pulling the Plug—The Bad News
Press Release — Toys”R”Us to Wind Down U.S. Business
WAYNE, N.J., March 15, 2018 — 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.