Chapter 11
Toys R Us Inc. has filed for bankruptcy reorganization.
Toys R Us Inc. has filed for bankruptcy reorganization, a victim of the sea change in retailing and the company’s own heavy debt burden, but said it would continue to operate as usual heading into the crucial holiday shopping season.
With its spacious, highceiling stores that hold thousands of items, Toys R Us pioneered the big-box format for toy sales and once was the go-to destination for people shopping for toys, baby products and birthday gifts.
But like many brick-andmortar retailers, Toys R Us was overwhelmed by consumers’ rapid shift to buying goods on the internet at sites such as Amazon.com and the severe price competition from those sites.
Although Toys R Us has its own website, it failed to keep pace with those of competitors.
In addition, Toys R Us is struggling under $5 billion of debt, much of it stemming from 2005 when a trio of investment firms bought
the Wayne, N.J., company and took it private.
Toys R Us operates 1,695 stores, including its Babies R Us stores. All told, the company does business in 38 countries and employs 65,000 people worldwide.
With its filing under Chapter 11 of the U.S. bankruptcy code late Monday, Toys R Us remains open but is protected from creditors’ claims while it works out a court-supervised reorganization plan.
Toys R Us did not announce any planned store closures — “in fact, we will be announcing our seasonal hiring push and expect to hire thousands of employees in the coming months,” spokeswoman Jessica Offerjost said Tuesday.
The company’s filing came in U.S. Bankruptcy Court for the Eastern District of Virginia in Richmond. Toys R Us said its Canadian unit also intended to seek reorganization in bankruptcy court in Ontario.
Toys R Us has 259 licensed stores outside of the United States and Canada that it said are not part of the reorganizations.
“Today marks the dawn of a new era at Toys R Us where we expect that the financial constraints that have held us back will be addressed,” Chief Executive David Brandon said in a statement.
He said the company already had received a commitment from lenders for more than $3 billion in financing that would help ensure that Toys R Us stores remained stocked with products.
Toys R Us follows several other retail chains that have sought bankruptcy protection because of the shift in retail spending habits, including shoe chain Payless ShoeSource Inc., children’s clothing seller Gymboree Corp. and jeans retailer True Religion Apparel Inc.
Toys R Us traces its roots to 1948, when founder Charles Lazarus opened a baby furniture store in Washington. He later began selling toys as well and adopted the Toys R Us name in 1957, with the backward R in the logo to give the impression a child had written it.
Toys R Us was taken private in 2005, acquired by the investment firms Bain Capital, KKR & Co. and Vornado Realty Trust in a deal financed mostly with debt. The plan had been to take the company public, but that never happened.