Toys R Us Files for Bankruptcy Ahead of Busy Holiday Season – What’s Next?
The toy retail giant has 1,600 locations operating around the world.
Toys R Us, a staple in my childhood, announced on Monday (September 18) that they have filed for Chapter 11 bankruptcy protection. It's a move that they hope will preserve their stores and business for many generations to come. How did this happen? Simple. It all comes down to debt.
Over the next two years, Toys R Us is expected to pay back a large sum of its $4.9 billion debt. $400 million is due in 2018, with $1.7 billion due in 2019. And that's not Monoply money we're talking about.
This debt stems from the $6.6 billion acquisition that took place in 2005 with Kohlberg Kravis Roberts, Bain Capital Partners and Vornado Realty Trust. Dave Brandon, chairman and CEO of Toys R Us, remains optimistic:
Today marks the dawn of a new era at Toys"R"Us where we expect that the financial constraints that have held us back will be addressed in a lasting and effective way.
He added that this will be a way for Toys R Us to keep their brand alive for many generations to come. This financial crutch will allow them to focus on moving product in new ways, like revamping their website, and possibly focusing on different products, specifically with Babies R Us. This cushion will also allow Toys R Us to solidify their long-term plans with partners like Mattel and Hasbro.
On a personal level, I hope they can turn it around. For many kids, Toys R Us is the happiest place on earth. I remember one day walking into the store with my parents. I was told beforehand that I was not getting anything once inside. Although bummed, I knew throwing a fit wouldn't do any good, so I kept my eyes on the floor and followed my mom through the store. I don't remember what she was shopping for, but I do remember turning down the Barbie aisle. She whispered in my ear that I could pick one Barbie to take home since I was such a good girl. That's when skateboarding Tori came home with me.
I loved Barbies as a girl and I'm pretty sure when I grew out of that phase, Toys R Us took a major hit losing my business.