Crushing debt and online rivalry drive Toys ‘R’ Us to bankruptcy

WILMINGTON: Toys ‘R’ Us Inc, the once-dominant specialty retailer and ultimate toyland for a generation of post-war baby boomers, filed for bankruptcy thanks to a crushing debt load from a previous buyout and relentless competition from warehouse and online retailers.

The bankruptcy filing is the latest blow to a brick-and-mortar retail industry reeling from store closures, sluggish mall traffic and the gravitational pull of Amazon.com Inc, which has revolutionised the way people consume with affordable online offerings and global home delivery service.

A dozen-plus major retailers have filed for creditor protection this year, including Payless Inc, Gymboree Corp and Perfumania Holdings Inc, all of which are using the Chapter 11 process to close underperforming stores and expand online operations.

The shakeout is also reverberating across American malls and shopping districts. More than 10% of US retail space, or nearly one billion sq ft, may need to be closed, converted to other uses or renegotiated for lower rent in coming years, according to data provided to Bloomberg by CoStar Group.

The troubles at Toys ‘R’ Us come as retailers and suppliers ramp up for the all-important holiday shopping season. In an emailed statement, Mattel Inc said, “As one of our most important retail partners, we are committed to supporting Toys ‘R’ Us and its management team as they work through this process, particularly as we approach the holiday season.”

The bankruptcy filing by the company also may have global implications, especially for Chinese toy manufacturers. Some 38% of the company’s revenue came from overseas markets in the latest fiscal year.