Toys “R” Us has officially filed liquidation papers. The company did this on Thursday in a move that could spell the beginning of the end of what was once one of the largest toy retailers in the US. Toys “R” Us told employees right after the liquidation papers were filed that it will be closing or selling all its stores in the US. The company has over 700 stores around the country.
In the liquidation filing, Toys “R” Us says that its creditors have decided that the only way to minimize losses is to liquidate the entire inventory in 735 Toys “R” Us stores in the US. The creditors also felt that it was time to begin an orderly wind down of operations. Things were really getting tough for the toys retailer with estimates showing that Toys “R” Us would run out of cash in May.
However, there are still a few issues that need to be addressed. First, there are over 33,000 people who work for Toys “R” Us. Their fate is not known and the liquidation papers didn’t provide any clear answers as to how this issue will be handled. The only thing Toys “R” Us said was that these jobs are safe for the next 60 days.
Toys “R” Us has blamed the poor performance during the holiday season for this downfall. In a conference call with employees, the company’s CEO David Brandon said that sales during the holidays were nearly half of the usual $600 million that the company makes on such periods. In addition to this, important vendors also scaled back shipments to the chain because of its struggles. With empty shelves, buyers had no choice but to go elsewhere.
Despite this sweeping move to close down all Toys “R” Us stores, there is some hope that at least 200 high-performing retail outlets could actually survive. A report on CNBC says that Toys “R” Us is seeking a buyer for the US and Canada stores. The company’s CEO slated the vendors and the buyers who turned away from Toys “R” Us saying that it’s a decision they will live to regret. The CEO also expressed his disappointment in the current turn of events saying that he always felt that Toys “R” Us is a brand that should exist in the US.
Toys “R” Us UK also confirmed this week that it will begin liquidation. There are 100 Toys “R” Us stores in the UK and the company is hoping to complete the entire liquidation process in six months. Other major stores in France, Spain, Poland, and Australia will also follow the same plan.
The toys chain has been dealing with a $5 billion debt load, and it filed for bankruptcy under Chapter 11 last year. Experts say that Toys “R” Us failed to quickly adapt to changing retail trends in the market and it seems that it’s now paying the price.
