Toys ‘R’ Us seeks to halt vendor payments

Toys “R” Us is in talks to sell its entire Canadian business as it works to shutter its 70-year-old U.S. operations, but analysts are skeptical about the future of the brickand-mortar toy retailer’s existing business model.

The company confirmed Thursday it is in “active discussions regarding a transaction that would result in an acquisition of the entire Canadian business,” as the U.S. company seeks approval in its bankruptcy proceedings for the sale of its equity interest in the Canadian business.

The statement came a day after California-based toy company MGA Entertainment confirmed its CEO Isaac Larian and affiliated investors have made a bid for the Toys “R” Us Canada operations. “Toys “R” Us Canada is a good business,” Larian said in a statement. “They run it efficiently, and have good leadership. At the right price, it makes economical sense.”

Toys “R” Us CEO David Brandon has said the company will try to bundle its Canadian business with about 200 U.S. stores as it looks to find a buyer, but the MGA spokesperson declined to provide details on how much of the business Larian has made a bid for.

The U.S. company has moved to close or sell all its 740 stores in the United States, finalizing the downfall of the chain that succumbed to heavy debt and relentless trends that undercut its business, from online shopping to mobile games.

The Canadian Toys “R” Us business has said it remains committed to serving its customers at its 82 stores across Canada and e-commerce site, which remain open for business.

The Canadian division filed for creditor protection in September but said it had financing commitments to ensure normal operations throughout the proceedings and now plans to forge ahead under a new owner.

But industry analysts aren’t convinced the Canadian stores will be able to go it alone.

The company is too generalized and spread out to compete against the increasing online and discount retailer competition, said Mark Satov, founder of Satov Consultants Inc.

“They need to be some combination of fewer stores and smaller footprint. There’s not room for that much square footage in Canada for a specialty toy retailer,”hesaid.