Toys R Us plans up to 182 closings

Toys R Us Inc. is planning to close up to 182 U.S. stores as part of a reorganization plan to emerge from its September bankruptcy, according to a court filing.

The move to shutter about 20 percent of its U.S. store base, which needs court approval, comes four months after the world’s largest toy chain filed for protection from its creditors, a response to years of lackluster results and an unsustainable $5 billion debt load. The closures will begin next month, with Babies R Us locations accounting for at least half.

Among the closures announced are the Toys R Us at 5609 E. Rogers Ave. in Fort Smith and the Babies R Us in the Shackleford Crossings shopping center at 2616 S. Shackleford Road in Little Rock. There are three other Toys R Us stores in Arkansas — in Little Rock, North Little Rock and Fayetteville.

Toys R Us wouldn’t say how many jobs will be cut. It said some employees will be moved to other stores and those who cannot be will get severance pay. Chairman and Chief Executive Officer Dave Brandon said Wednesday that tough decisions are

required to save the company.

He acknowledged “operational missteps” during the critical Christmas season when shopping at its stores and online wasn’t as easy as it should have been.

Gerrick Johnson, an analyst at BMO Capital Markets, had estimated that holiday sales at the company’s North America stores were down more than 10 percent. He attributed much of the decline to people’s confusion around the bankruptcy filing and a fear of buying gifts at Toys R Us because they thought they wouldn’t be able to return them if needed. Johnson also blamed a weak marketing campaign and email promotions that didn’t create a sense of urgency.

Toys R Us has struggled with debt since private-equity firms Bain Capital, KKR & Co. and Vornado Realty Trust took it private in a $6.6 billion leveraged buyout in 2005. The plan

had been to take the company public again, but weak sales have prevented that from happening. With such debt levels, Toys R Us has not had the financial flexibility to invest in its business.

In December, Bloomberg News reported that the retailer would close as many as 200 stores.

The closures include the Toys R Us store in Wayne, N.J., where the company is based, and the flagship Babies R Us in Manhattan’s Union Square. The targeted stores accounted for $925 million in sales in 2017, according to the filing.

Brandon’s plan includes revamping a dozen locations to better combine the baby and toy businesses into one co-branded experience, with more such stores coming next year. It also will cut the number of items offered in locations to reduce inventory, according to the memo. That will help simplify the company’s store operations and supply chain.

He also wants to revamp

the retailer’s loyalty program and pricing model to be more competitive. At Babies R Us, the focus will shift to promoting its baby-registry business. That operation generates more sales of higher-priced items, such as furniture.

Shutting stores is common for bankrupt retailers, but Toys R Us had said that its Chapter 11 filing wouldn’t mark a big retrenchment. Brandon said shortly after the filing that the company was pushing ahead with plans to open smaller stores in some cities. He also vowed to make locations easier to shop and more fun by adding toy demonstrations and other experiences.

The closings aren’t good news for toy-makers. Companies large and small rely on Toys R Us to introduce new offerings to consumers. The industry also didn’t have a good holiday season, based on early signs, including tepid demand for Star Wars-themed toys.