Toys R Us files for bankruptcy protection


Toys R Us has filed for bankruptcy protection in the US and Canada as the chain grapples huge debts, tough competition and pressure from suppliers.

The company, which has 1,600 stores worldwide employing more than 60,000 staff, said its operations outside the US and Canada did not come under the so-called Chapter 11 filing in Virginia and its Canadian equivalent.

The announcement suggested there was no prospect of an immediate knock-on effect for its 110 stores, 2,500 staff or website in the UK.

The chain is trading as normal worldwide.

The proceedings across the Atlantic are designed to give loss-making Toys R Us time to reorganise its finances by protecting it from creditor demands as it tackles a debt pile of $5bn (£3.6bn) with a $400m bill looming next year.

The private equity-owned company said it had received a commitment for more than $3bn in financing from a syndicate of lenders, subject to legal approval, that would immediately improve its financial health and support its ongoing operations.

Chairman and chief executive, Dave 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.

“Together with our investors, our objective is to work with our debt holders and other creditors to restructure the $5bn of long-term debt on our balance sheet, which will provide us with greater financial flexibility to invest in our business, continue to improve the customer experience in our physical stores and online, and strengthen our competitive position in an increasingly challenging and rapidly changing retail marketplace worldwide.”

Analysts said Toys R Us – which dates back to the 1950s – had struggled to shake off stiff competition from online-based rivals by failing to adapt its costly store-focused business model.

They pointed to rumours of a growing crisis of confidence among suppliers ahead of the filing as the chain’s crucial US holiday season, including Christmas, looms.

Neil Saunders, managing director of GlobalData Retail, said: “While today’s decision does not necessarily mean it is game over for Toys R Us, it brings to a close a turbulent chapter in the iconic company’s history.

“A combination of high debt and severe structural changes in the industry created a toxic mix against which Toys R Us had little choice but to restructure and try to put itself on a firmer footing.

“The past decade has seen a dramatic change in the domestic toy market with new channels, increased competition, and new technology all having a deleterious impact on the sector and traditional toy stores.

“Unfortunately, Toys R Us has not responded effectively to these challenges and, as a result, has found itself with both a weak balance sheet and falling sales.”