Founded in 1948, Toys ‘R’ Us once had a revenue of almost $12 billion in the year 2014. The firm was once a dominant player in the toy market around the globe, but recently it has struggled against larger rivals such as Amazon. Toys “R” Us are struggling with $5 billion in long-term debt, has filed for Chapter 11 bankruptcy protection in the U.S. and Canada, saying it will continue its normal business operations.
Toys “R” Us said court-supervised proceedings would help the company to restructure the debt and set the stage for long-term growth. The company announcement also said separate operations outside the U.S. and Canada are not part of the filings. The move casts a shadow over the future of the company’s nearly 1,600 stores and 64,000 employees, but the company assured that its stores worldwide will remain open and will continue to work with suppliers and sell merchandise.
The bankruptcy filing is more evidence that traditional retailers are struggling as online retailers continue to capture market share. Neil Saunders, managing director of GlobalData Retail, mentioned that “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 adequately to these challenges,”
Toys ‘R’ Us still has support as various lenders, including a JPMorgan-led bank syndicate and some of the company’s existing lenders, have committed more than $3bn in new financing to turn the business around but how long can they sustain now?
Toys ‘R’ Us is one of some traditional retailers to have run into trouble recently. Once big time chains like ‘Sears’ and ‘Macy’s’ has also been struggling with falling sales and heavy losses. US clothing chains like The Limited and Wet Seal filed for bankruptcy protection earlier this year, adding to shoe retailer Payless.
Online presence of companies like Amazon has changed the market completely but is it going towards monopoly?