It’s game over, for what was once the country’s preeminent toy retailer.
In papers filed with a U.S. bankruptcy court shortly after midnight Thursday, Toys “R” Us finally confirmed what had become the worst-kept secret – it plans to close or sell all of its 735 remaining Toys “R” Us and Babies “R” Us stores in the U.S., six months after it filed for bankruptcy.
Reports of the imminent liquidation of the company’s U.S. assets have been swirling for at least the past couple of weeks, and news stories citing sources began circulating Wednesday evening that it was a done deal. So Toys “R” Us shoppers have been well prepared for the news. Until the court filing made it official, though, rumors took hold, as many shoppers saw and shared erroneous reports on social media that pertained only to the company’s closing U.K. stores, such as the fact that they’re no longer accepting gift cards (U.S. stores still are, for now).
There’s still a glimmer of hope that someone could buy some of the U.S. stores, along with the Toys “R” Us name, and continue running a scaled-down version of the chain. In its post-midnight court filing, Toys “R” Us said it’s hoping to sell up to 200 of its “side-by-side” combination Toys “R” Us/Babies “R” Us stores as a package deal with its Canadian stores. “To be clear, the Debtors are not precluding the prospect of any going concern option for U.S. stores,” the company told the court. “But because time is of the essence to mitigate losses and maximize recoveries to U.S. stakeholders, the Debtors regrettably must move forward with implementing a wind-down while simultaneously pursuing a going-concern transaction tied to Canadian operations.”
So it’s not necessarily the end of the line for the Toys “R” Us name, but it will be for the company as it currently stands.
“I am very disappointed with the result, but we no longer have the financial support to continue the Company’s U.S. operations,” Toys “R” Us Chairman and CEO Dave Brandon said in an early-morning statement. “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.”
News of the company’s fate has been foreshadowed so much that it came as no big surprise, so plenty of obituaries for the once-iconic retailer have already been written. And in documents it had filed with the bankruptcy court, Toys “R” Us effectively wrote its own. “Over the past several years, the Debtors have faced a challenging commercial environment marked by increased competition from both traditional and new competitors and a rapid and substantial shift in consumer retail preferences away from shopping at brick and mortar stores in favor of online channels,” the company informed the court in a recent filing.
“Traditional and new competitors” include places like Walmart and Target, which have expanded their toy sections over the years to the point that many shoppers didn’t see a need to make a special trip to a store that sold only toys. And of course, Amazon made it easy to shop for toys or just about anything from the comfort of your home. And they could all afford to sell toys as loss leaders, while earning profits elsewhere to make up for it, while Toys “R” Us had no such luxury, since toys were its only business.
Left unsaid is the fact that many kids don’t seem to play with toys quite so much at all anymore. Who needs a store devoted to physical playthings when kids are plenty entertained with iPads and apps?
It didn’t help that the company is loaded with debt. It owes some $5 billion and counting, a burden that dates back to its private equity buyout back in 2005. “This debt has held us back from making the investments we need to compete effectively in what has become an increasingly challenging and rapidly changing retail marketplace worldwide,” the company said in its initial bankruptcy filing.
Toys “R” Us managed to secure financing to help get it through the all-important holiday season. And it assured shoppers that everything would be business as usual in its stores. But, perhaps spooked by the bankruptcy news, many shoppers and suppliers stayed away. And the strong holiday sales the company had pinned its hopes on, failed to materialize. “2017 U.S. holiday sales came in well below worst case projections,” the company lamented. So, in the absence of a willing buyer for the chain as-is, the company ultimately had no choice but to wind down its business altogether.
While many shoppers found Toys “R” Us to be too expensive and sometimes cluttered, most have fond feelings for the soon-to-be-shuttered stores. Much of that, though, is based on nostalgia and youthful memories, not necessarily from actual recent visits to a Toys “R” Us store.
“End of an era. Killing off a piece of my childhood. Before Amazon, before Walmart, before the age of screens there was the wonderland called Toys ‘R’ Us,” one commenter wrote on the Toys “R” Us Facebook page. “So sad that so many children will never experience the joy of being in a Toys R Us store,” wrote another. “I’ll always be a Toys R Us kid no matter how old I am,” added a third.
And then there are the people who want one last chance to get a deal. “Are they closing for sure and if so when will all the discounts start?” one commenter asked.
It’s enough to make you wonder where those eager shoppers were when the company needed them. But perhaps those shoppers are wondering where the deals were when they needed them. It appears they’ll get their deals now – but at a steep price, from the store that’s now forced to provide them.
How bout that whole company closing down update instead?