Toys R Us closings cost 30,000 jobs, hurt suppliers, landlords
The demise of Toys R Us will have a ripple effect on everything from toy makers to consumers to landlords.
The 70-year-old retailer sought court approval Thursday to liquidate its remaining 735 stores, including its Toys R Us store in Hamilton Village and its nearby Babies R Us store on Gunbarrel Road. The store closings will eliminate the jobs of some 30,000 employees while spelling the end for a chain known to generations of children and parents for its sprawling stores and Geoffrey the giraffe mascot.
The closing of the company’s U.S. stores over the coming months will finalize the downfall of the chain that succumbed to heavy debt and relentless trends that undercut its business, from online shopping to mobile games.
And it will force toy makers and landlords who depended on the chain to scramble for alternatives.
Chattanooga-based mall operator CBL Properties said the company has three Toys R Us stores in its nationwide portfolio.
CEO David Brandon told employees Wednesday the company’s plan is to liquidate all of its U.S. stores, according to an audio recording of the meeting obtained by The Associated Press.
There is still some hope. Toys R Us will try to bundle its Canadian business, with about 200 U.S. stores, and find a buyer. The company’s U.S. online store would still be running for the next couple of weeks in case there’s a buyer for it. Workers in the U.S. will get paid for the next 60 days if they show up for work, but after that all benefits and pay will be cut, Brandon told employees at the meeting, according to the recording. Some workers will be asked to stay longer to help with the liquidation. The company said that gift cards will be honored for the next 30 days. It will not accept returns once the liquidation sales start.
It’s likely to also liquidate its businesses in Australia, France, Poland, Portugal and Spain. It’s already shuttering its business in the United Kingdom. That would leave it with stores in Canada, central Europe and Asia, where it could find buyers for those assets.
Toys R Us Asia Ltd. has more than 400 retail outlets in Brunei, China, Hong Kong, Japan, Macau, Malaysia, Philippines, Singapore, Taiwan and Thailand. It is a Hong Kong-based joint venture with the Fung Group, which owns a 15 percent stake. It also controls Asian sourcing giant Li & Fung, a major supplier to Western retailers like Walmart.
A Fung spokesperson did not immediately reply to a request for comment.
When Toys R Us initially announced it was filing for bankruptcy protection last year, the Asian venture said it was not affected and operated as a separate legal entity independent of other Toys R Us businesses around the world.
In Hong Kong, where Toys R Us has 15 stores, parents said there were few other choices in a retail market dominated by a few big players.
“If you want something like a mainstream toy shop, then Toys R Us is the only place you can go,” said Ching-yng Choi, whose home and office are both within walking distance of Toys R Us shops.
“Basically either it’s Toys R Us or you go to specialized and very expensive toy shops that sell, for example, wooden toys that come from very far away countries like in Europe,” she said.
Toys R Us had about 60,000 full-time and part-time employees worldwide last year.
“We worked as hard and as long as we could to turn over every rock,” Brandon told employees.
But in his address, Brandon took shots at shoppers and vendors who cut back on their support for the chain in recent months.
“I believe that all of them will live to regret what is happening to our company,” he said.
When the chain filed for Chapter 11 bankruptcy protection last fall, saddled with $5 billion in debt that hurt its attempts to compete as shoppers moved to Amazon and huge chains like Walmart, it pledged to stay open.
But Brandon told employees its sales performance during the holiday season was “devastating,” as nervous customers and vendors shied away. Earnings before interest, tax, depreciation and amortization — a measure of the company’s operating performance — was a paltry $81 million for the critical fourth quarter.
That compared with $347 million in the year-ago period, according to the court filing. That made its lenders more skittish about investing in the company. In January, it announced plans to close about 180 stores over the next couple of months, leaving it with a little more than 700 stores.
The company’s troubles have affected toy makers Mattel and Hasbro, which are big suppliers to the chain. But the likely liquidation will have a bigger impact on smaller toy makers that rely more on the chain for sales. Many have been trying to diversify in recent months as they fretted about the chain’s survival.