You may have heard about the recent struggles facing the giant toy retailer. The rumours are true, Toys ‘R’ Us has finally announced its closure in the US after filing for bankruptcy.
The company was unable to find the buyer needed to bail them out of billions of debt, and now 30,000 jobs are hanging by a thread.
The impending closure of Toys ‘R’ Us also impacts “hundreds of toy makers” that use the company as a distributor, including Barbie, Lego, Hasbro, and Mattel.
The decline of in-store toy purchases came as parents began shopping online on sites like Amazon and eBay, combined with the evidential push towards electronic/screen gaming that saw traditional games and toys collect dust on store shelves.
The retailer was unable to boost sales after they sought a “$6.6 billion leveraged buyout by private equity firms in 2005.”
Toys ‘R’ Us commanded a large portion of toys sales in the US, and their bankruptcy will restructure the market. Global investment firm Jefferies expects that 40% of their sales will be rerouted to Amazon, while another 30% would go to Walmart.
What comes after bankruptcy? Well, the company must try to make back some of its invested money by selling off assets. Toys ‘R’ Us said they are in the process of seeking approval to “liquidate in 735 U.S. stores, which debtors anticipate will close by the end of this year.”
Apparently, the company is in talks to sell 200 of those stores in a package deal that includes the 80 stores in Canada as they attempt to recoup some of the losses through the sale of real estate.
Canadians can recall similar events occurring with giant retailers such as Zellers, Target Canada, and more recently, Sears, when they each announced their inability to continue operations.
However, some industry experts felt that the Canadian stores could've survived the American bankruptcy; sales were profitable and growing north of the border last September.
Toys ‘R’ Us admits that their sales were undercut by competitors like Target Corp, Walmart Inc and Amazon who sold toys at lower prices.
Retail analyst Neil Saunders explains, “Even during recent store closeouts, Toys R Us failed to create any sense of excitement … Its so-called heavy discounts remained well above the standard prices of many rivals.”
Say goodbye to a chunk of childhood history, folks. You may not miss the temper tantrums in the Barbie aisle, but the children of the future will never get to experience it quite the same. Read the full story via Reuters.