Toys “R” Us is officially closing its doors after 70 years of being America’s favorite toy store. A combination of overwhelming debt and the pressures of big-box retailers like Walmart and online retailers like Amazon have put the squeeze on the store in recent years. In a series of financial missteps over the last decade, the cost and competition of operating a brick-and-mortar toy store in the digital age have finally taken their toll.
In a worst-case-scenario financial quarter, the company earned just $81 million before tax against a $5 billion debt. After filing for bankruptcy in September, it became clear that the hope to liquidate assets to save the company would not be a viable option to carry stores until the 2018 holiday season. Consequently, all 800 United States stores, in addition to those in Puerto Rico and the United Kingdom, will either be shut or sold. As a result, about 31,000 workers will be laid off in the process. According to CNN, employees will not receive severance packages under bankruptcy laws, but will still get insurance benefits and 401(k) payments as the company winds down.
This leaves consumers in a bittersweet situation as many say goodbye to the toy store of their childhood, while also taking advantage of the liquidation sale prices. Discounts are expected to begin modestly in the 20-30 percent off range but eventually reaching 75-80 percent as time goes on. The official sales timeline and date of closure is still undetermined, but those close to the company, like attorney Chuck Tatelbaum, say that the time to head to stores for hot-ticket items is sooner rather than later.
“I think that the sales will run for up to 60 days, and the closures will have taken place by then,” said Tatelbaum. “The rent obligation is just so high.”
Toys “R” Us wrote on its website, in regard to the store-wide sales, that “our team members are standing by to help you take advantage of the deep discounts that will be available during the liquidation process.” The company notes that there are ongoing efforts to continue operations internationally in stores in Canada, Europe and Asia, but that service to customers will remain at the forefront until doors are officially closed in the United States. The biggest emphasis is for consumers to use any gift cards they may have before it is too late.
Courtesy: Property Week
CEO David Brandon spoke on the matter and confessed that there is still the possibility of a buyer coming in and purchasing stores to save them from closure, but regardless of that uncertainty, U.S. stores will be out of cash by May. Especially with the case of Babies “R” Us, which is under the Toys “R” Us banner and also is experiencing mass closures, the hope is for a last-minute buyer and the maintenance of an online presence.
“Because of the possibility we will continue to operate our web store in the U.S. for the next few weeks while that sorts itself out – because if in fact there is someone who wants to keep a foothold in the U.S. they will likely do that in such a way that they can retain customers, such as people involved in our baby registry programs,” stated Brandon. According to IBISWorld, Babies “R” Us is also under pressure from market competition, with about 5 percent of the market share for online baby product sales behind Amazon’s 20 percent.
The official closing date of many stores is yet to be released, and while the company is still working to find a buyer to save the stores, it would seem that the coming months will be the beginning of the end for Toys “R” Us. Below is a map of store closings, so head to your neighborhood location for one last hurrah with Geoffrey the Giraffe and enjoy, while you can, being a Toys “R” Us kid.