Toys 鈥淩鈥� Us has filed for bankruptcy protection in the United States and says it intends to follow suit in Canada.
The company filed Chapter 11 documents late Monday in U.S. Bankruptcy Court in Richmond, Virginia and says its Canadian subsidiary plans to seek protection in parallel proceedings under the Companies鈥� Creditors Arrangement Act in the Ontario Superior Court of Justice.
The chain also said it had secured US$3 billion in financing to stay open while it restructures its outstanding debt and establishes a sustainable capital structure to invest in long-term growth.
Toys 鈥淩鈥� Us said the 鈥渧ast majority鈥� of its approximately 1,600 Toys 鈥淩鈥� Us and Babies 鈥淩鈥� Us stores around the world and its web portals continue to operate as usual.
READ MORE:
READ MORE:
The company added that it is committed to working with its vendors to ensure inventory levels are maintained and products continue to be delivered.
鈥淭oday marks the dawn of a new era at Toys 鈥淩鈥� Us where we expect that the financial constraints that have held us back will be addressed in a lasting and effective way,鈥� said chairman and CEO Dave Brandon in a statement.
鈥淭ogether with our investors, our objective is to work with our debtholders and other creditors to restructure the $5 billion of long-term debt on our balance sheet.鈥�
Toys 鈥淩鈥� Us is headquartered in Wayne, N.J., and has nearly 65,000 employees worldwide.
The company said the proceedings are a way for Toys 鈥楻鈥� Us to work with its creditors on restructuring the debt beleaguering it. And it emphasized that its stores worldwide will remain open and it will work with suppliers and sell merchandise.
. files for bankruptcy protection in the US & intends to follow suit in Canada - company says stores will remain open worldwide
鈥� Ashley Wadhwani (@ashwadhwani)
The move comes at a critical time leading into the holiday season that is crucial to retailers鈥� bottom lines. The company said it was 鈥渨ell stocked as we prepare for the holiday season and are excited about all of our upcoming in-store events.鈥�
Retailers of all kinds are struggling, including Sears Canada, which has since closed more than 60 of its locations across B.C., laying off thousands of employees.
鈥淭oys 鈥楻鈥� Us had little choice but to restructure and try to put itself on a firmer footing, said Neil Saunders, managing director of GlobalData Retail. However, he added, 鈥渆ven if the debt issues are solved, Toys 鈥楻鈥� Us still faces massive structural challenges against which it must battle.鈥�
Retailers battle move to online shopping
Toys 鈥楻鈥� Us, a major force in toy retailing in the 1980s and early 1990s, started losing shoppers to discounters like Walmart and Target and then to Amazon. GlobalData Retail estimates that in 2016 about 13.7 per cent of toy sales were made online, up from 6.5 per cent five years ago.
And children are increasingly moving more toward mobile devices as playthings.
鈥淔or many children, electronics have become a replacement or a substitute for traditional toys,鈥� Saunders said.
Analysts say Toys 鈥楻鈥� Us hasn鈥檛 been aggressive about building its online business, and has let those sales migrate to rivals. And they say the company should have also thought of new ways to attract more customers in its stores, such as hosting birthday parties.
While toy sales overall have held up fairly well, they are shifting toward discounters and online companies. U.S. toy sales rose 6 per cent last year on top of a seven per cent increase in the prior year, says NPD Group Inc., a market research firm. That was the biggest increase since 1999 and was fuelled by several blockbuster movies.
But for the first half of 2017, sales rose three per cent. That puts more pressure on the later part of the year, when most toy sales occur, for the industry to meet NPD鈥檚 estimate for a 4.5 per cent annual increase. Lego is laying off 1,400 workers after saying profits and sales dropped in the first half. And the nation鈥檚 two largest toy makers, Mattel and Hasbro, reported disappointing second-quarter results.
Toys 鈥楻鈥� Us, based in Wayne, New Jersey, announced the filing late Monday. It said it was voluntarily seeking relief through the U.S. Bankruptcy Court for the Eastern District of Virginia in Richmond, and that its Canadian subsidiary would be seeking similar protection through a Canadian court in Ontario as it seeks to reorganize.
Toys 鈥楻鈥� Us said it expects to continue honouring return policies, warranties and gift cards, and customer loyalty programs should stay the same.
In a separate statement late Monday, the company said its online sales sites worldwide remain open for business during the court-supervised process.
The Canadian Press
Like us on and follow us on .
