Demise of Toys R Us will have a ripple effect
The 70-year-old retailer is headed toward shuttering its US operations, jeopardising the jobs of about 30000 employees, while spelling the end for a chain known to generations of children and parents for its sprawling stores and Geoffrey the giraffe mascot.
The closing of the company’s 740 US stores over the coming months will finalise the downfall of the chain that succumbed to heavy debt and relentless trends that undercut its business, from online shopping to mobile games.
And it will force toy makers and landlords who depended on the chain to scramble for alternatives.
Chief executive David Brandon told employees on Wednesday that the company’s plan was to liquidate all of its US stores.
Brandon said Toys R Us will try to bundle its Canadian business, with about 200 stores, and find a buyer.
The company’s US online store would still be running for the next couple of weeks in case there’s a buyer for it.
It’s likely to also liquidate its businesses in Australia, France, Poland, Portugal and Spain, according to the recording. It’s already shuttering its business in the UK. That would leave it with stores in Canada, central Europe and Asia, where it could find buyers for those assets.
Toys R Us Asia has more than 400 retail outlets in Brunei, China, Hong Kong, Japan, Macau, Malaysia, Philippines, Singapore, Taiwan and Thailand.
It is a Hong Kong-based joint venture with the Fung Group, which owns a 15percent stake.
It also controls Asian sourcing giant Li & Fung, a major supplier to Western retailers like Wal-Mart.
A Fung spokesperson did not immediately reply to a request for comment. When Toys R Us initially announced that it was filing for bankruptcy protection last year, the Asian venture said it was not affected and operated as a separate legal entity independent of other Toys R Us businesses around the world.
In Hong Kong, where Toys R Us has 15 stores, parents said there were few other choices in a retail market dominated by a big few.
Toys R Us had about 60000 full-time and part-time employees worldwide last year.
Brandon said that the company would be filing liquidation papers and there was to be a bankruptcy court hearing yesterday.
“We worked as hard and as long as we could to turn over every rock,” Brandon told employees.
When the chain filed for Chapter 11 bankruptcy protection last autumn, saddled with $5bn in debt that hurt its attempts to compete as shoppers moved to Amazon and huge chains like Walmart, it pledged to stay open.
But the company’s biggest albatross was that it had struggled with massive debt.
A private company, weak sales prevented it from being taken public again.