Toys R Us to ‘wind down’ U.S. operations
Announcement affects employees, stores in region
WAYNE, N.J. » Iconic toy retailer Toys R Us is moving toward the closure of its U.S. operations. The closing of the company’s 735 stores will impact an estimated 30,000 employees nationwide and bring an end to a chain known to generations of children and their parents.
In Pennsylvania, the company operates 55 Toys R Us and Babies R Us stores. Ten of the stores are located in Montgomery, Chester, Delaware and Berks counties.
Requests for information from the company about how many Pennsylvania employees may ultimately lose their jobs in the liquidation were not answered Thursday.
However, in discussions with Toys R Us in January, a representative told Digital First Media that while the number of employees per store varies, “roughly 25 team members” — a mix of full- and part-time employees — work in each store.
That could mean an estimated 2,500 employees in Pennsylvania could be impacted.
The company on Thursday announced it had filed a motion seeking bankruptcy court approval to begin the process of winding down its U.S. business and liquidation of inventory in all of the stores, including those in Puerto Rico.
Details about what liquidation sales and potential closing dates have not yet been released.
A bankruptcy hearing was expected to be held on Thursday.
“This is a profoundly sad day for us as well as the millions of kids and families who we have served for the past 70 years,” David Brandon, chairman and chief executive officer, said in a press release.
Several Digital First Media readers offered comments on Facebook. Some expressed disappointment, while others recognized the drivers behind the news.
“I worked in Wyomissing and Exton stores 2006-07. This breaks my heart,” Robert Tyson commented on Facebook Thursday.
“This makes me very sad. I used to love Toys R Us as a kid. And their Christmas catalog was the best,” Ash Lei added in a comment.
“Sad — another empty store. Times are changing. More on-line buying has hurt a lot of stores,” said Charles Ridpath on Facebook.
“Long lines, always had it or could get it. Loved that store on the pike in Springfield and always had Pampers and Similac. Every other Sunday nite (sic) I used to go and get my kid his stuff,” John Stier reminisced about the store in his Facebook comment.
“I am very disappointed with the result, but we no longer have the financial support to continue the company’s U.S. operations. We are therefore implementing an orderly process to shutter our U.S. operations and will pursue going concern sales or reorganizations of certain of our international businesses, while our other international businesses consider their options,” Brandon added.
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.
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.
Brandon said Toys R Us will try to bundle its Canadian business, with about 200 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.
In a Facebook post Thursday, Andrew Abrahams said, “The beginning of the retail store crash. Who’s next?”
“Amazon ships out of a warehouse. They do not have the expenses that a brick and mortar store has so their prices are much cheaper and you can shop at 3 a.m. in your jammies with free shipping in two days or less for products that cost a lot less than they do at any store,” said Patti Gable Miller in a Facebook comment.
When Toys R Us 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 chains like Walmart — it pledged to stay open.
In January, the company announced plans to close 180 Toys R Us and Babies R Us locations, including the Babies R Us at 104 Bartlett Ave. in Exton. Liquidation sales at those affected stores were launched in early February, with store closings slated for sometime in April.
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.
Toys R Us has been hurt by the shift to mobile devices taking up more play time. But steep sales declines over the holidays and thereafter were the deciding factor, said Jim Silver, editorin-chief of toy review site TTPM.com.
Now, the $11 billion in sales still happening at Toys R Us each year will disperse to other retailers like Amazon and discounters, analysts say. Other chains, seeing that Toys R Us was vulnerable, got more aggressive. J.C. Penney opened toy sections last fall in all 875 stores. Target and Walmart have been expanding their toy selections.
Toys R Us dominated the toy store business in the 1980s and early 1990s, when it was one of the first of the “category killers”— a store totally devoted to one thing. Its scale gave it leverage with toy sellers and it disrupted general merchandise stores and mom-and-pop shops.
But the company lost ground to discounters like Target and Walmart, and then to Amazon, as even nostalgic parents sought deals elsewhere. GlobalData Retail estimates that nearly 14 percent of toy sales were made online in 2016, more than double the level five years ago.
But the company’s biggest albatross was that it struggled with massive 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. Weak sales prevented them from taking the company public again. With such debt levels, Toys R Us did not have the financial flexibility to invest in its business.