Toys 'Were' Us
The children's toy store struggled with a massive $5 billion it had racked up and fierce online competition. The retailer was seeking a way out of the debt. Toys 'R' Us said it would keep its 1,600 Toys 'R' Us and Babies 'R' Us stores open. The company headed into the busy 2017 holiday season. Toys 'R' Us had been crippled by debt since it was acquired by private equity firms KKR; Bain Capital; and real estate company Vornado Realty Trust. Toys 'R' Us was acquired in a $6.6 billion leveraged buyout in 2005. Toys 'R' Us started the process of going public in 2010. However, the company ultimately pulled the filing. Toys 'R' Us cited "unfavorable market conditions."
CEO Dave Brandon described the bankruptcy as a way to work with its creditors to get back on solid financial footing. The company also said the bankruptcy was designed as a way to invest in long-term growth in a difficult retail environment. In a public statement, Brandon said: "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."
The company received more than $3 billion in debtor-in-possession financing from J.P.Morgan Chase and other lenders. The financing was designed to help Toys 'R' Us sustain operations during the bankruptcy process. Despite the financing, sales slipped in the face of competition from giants like Amazon and Wal-Mart. In its latest quarter (in 2017) same-store sales fell by 4.1%. This caused Toys 'R' Us to post losses of $164 million. Despite the bankruptcy filing, Toys 'R' Us said the "vast majority" of its stores were profitable. The company said it would be reevaluating Toys 'R' Us' physical footprint during the bankruptcy process.
Toys 'R' Us joins a parade of other retailers that have sought bankruptcy protection in 2017. Those stores include shoe store Payless and children's clothing retailer Gymboree. Many other retailers have aggressively closed stores and laid off employees, instead shifting resources to online capabilities.