Just before the holiday shopping season,Toys”R”Us surprised the world by announcing a Chapter 11 bankruptcy.
At the time, it was just a restructuring of their $5 billion in debt — they promised no large-scale store closures.
Toys”R”Us is closing one out of five stores in the US (20% of the chain).
When Toys”R”Us initially filed Chapter 11 bankruptcy, they were optimistic about the chain’s future as they made plans to increase employee wages over the next three years and turn stores into an “interactive” experience where shoppers could also host birthday parties, for example.
Now Toys”R”Us is saying that may still happen if the retailer is able to negotiate better lease terms on stores slated to close.
In addition to closing 182 stores, in an effort to ease leases across the board, Toys”R”Us is planning to combine many TRU stores with Babies”R”Us stores in-house.
Toys”R”Us experienced a 15% drop in holiday sales compared to 2016.
It’s no secret that Toys”R”Us was putting all its eggs in the holiday-shopping-season basket. And when the Q4 dust settled, it became clear that proceeding with store closures was the only way they’d dig out of the billions of dollars of debt to vendors like Graco, Mattel and Hasbro.
Toys”R”Us relies on a strong showing in fourth-quarter sales. In fact, 40% of its net sales take place during the holiday season, which makes a hit like 15% less than the year prior particularly painful.
Can Toys”R”Us keep pace with competitors like Amazon, Target and Walmart?
When Toys”R”Us declared bankruptcy, KCL predicted they’d have a huge uphill battle to fight in order to keep up with competitors like Target and Walmart. This is largely because Target and Walmart, while dealing with their own struggles to compete with Amazon, have been able to pivot and stay relatively competitive.
Target is continually tweaking and refining its app in order to make shopping seamless. Walmart introduced Mobile Express Returns last year in order to make returning online orders basically effortless. But competition with Amazon is heavy and it seems most retailers are nervous about keeping their footing in the retail market in the face of Amazon’s continual ability to outperform brick-and-mortar stores.
Expect to see going-out-of-business sales as stores close from February-April this year.
Store closures will begin in February and continue through April. This means potential for big savings, so shop early for the deepest discounts. Of course, discounts will probably get better as time goes by but inventory will deplete.
We will keep you updated as we learn more about the fate of Toys”R”Us. In the meantime, here’s a list of stores that’ll be closing — is yours on the list?