The Retail Apocalypse Is Here
America’s Retail Is Crumbling: Toys R US Files for Chapter 11 Bankruptcy. Toys R Us have over 60,000 employees. They occupy the anchor position in many of the malls. The loss of Toys R Us will lead to decreased foot traffic to other nearby stores. This is the beginning of the collapse of Retail in America. Here is the complete story.
Crippled by Competition and Debt
Toys “R” Us, one of the world’s largest toy store chains, has filed for bankruptcy protection, becoming the latest casualty of the pressures facing brick-and-mortar retailers.
The company made the Chapter 11 bankruptcy filing late Monday night in federal court in Richmond, Va., acknowledging that it needed to revamp its long-term debt totaling more than $5 billion.
The retailer, which also owns Babies “R” Us, has struggled to compete with Amazon and stores like Walmart.
But the financial plight of Toys “R” Us was exacerbated by a heavy debt load that has weighed on the company for years. The private equity firms Kohlberg Kravis Roberts and Bain Capital, as well as the real estate firm Vornado Realty Trust, purchased the company in a leveraged buyout for about $6 billion in 2005.
The company faced $400 million in debt payment coming due in 2018 and was burning through its cash. It hired advisers, including the law firm Kirkland & Ellis, to help come up with a plan.
In a statement on Monday night, Toys “R” Us said the filing would help the company invest in long-term growth and “fuel its aspirations to bring play to kids everywhere and be a best friend to parents.”
Toys “R” Us joins a wave of retail bankruptcies this year, including the children’s clothing retailer Gymboree, Payless ShoeSource and rue21, which sells clothing for teenagers. Other retailers have closed thousands of stores and laid off tens of thousand of workers as they try to cut costs and compete with e-commerce.
The company said its roughly 1,600 Toys “R” Us and Babies “R” Us stores around the world, including in Australia, Asia and North America, would continue to operate “as usual.”
JPMorgan Chase and a group of other lenders have agreed to provide the company $3 billion in financing to help Toys “R” Us continue paying suppliers and employees.
“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,” Dave Brandon, the company’s chairman and chief executive, said in a statement.