Toys ‘R’ Us files for bankruptcy

COMPANY FILES FOR BANKRUPTCY PROTECTION IN U.S.; PLANS SAME IN CANADA

Toys “R” Us Canada has initiated bankruptcy proceedings in an Ontario court a day after it filed for creditor protection in the U.S.

The company said Tuesday its 82 stores across Canada, as well as its e-commerce sites, will continue to operate as usual during its restructuring process under the Companies’ Creditors Arrangement Act.

“The restructuring is intended to facilitate the continued success of our iconic brands; building a stronger company for our customers, business partners and team members,” Melanie Teed-Murch, president of Toys “R” Us and Babies “R” Us Canada said in a statement.

The move comes at a critical time leading into the holiday season that is crucial to retailers’ bottom lines.

The company has financing commitments to ensure normal operations throughout the CCAA proceedings, including stocking the hottest toys for the holidays and honouring all gift cards, warranties and returns, Teed-Murch said.

“We are confident that this process will enable us to leverage Toys “R” Us existing strengths to succeed.”

Toys “R” Us filed Chapter 11 documents late Monday in U.S. Bankruptcy Court in Richmond, Virginia.

The company said its approximately 1,600 Toys “R” Us and Babies “R” Us stores around the world — the “vast majority of which are profitable” — and its web portals continue to operate as usual.

The chain also said it had secured US$3 billion in financing to stay open while it restructures its outstanding debt and establishes a sustainable capital structure to invest in long-term growth.

Toys “R” Us is the latest brick-and-mortar retailer to struggle amid growing competition from online merchants and changing consumer preferences, with Sears Canada filing for CCAA protection this past June.

If Toys “R” Us had offered a better online offering “perhaps they could have avoided such fate,” said Ryerson University business professor Seung Hwan Lee.