Toys "R" Us, the world's leading retailer dedicated to toy and baby products, filed for chapter 11 bankruptcy protection late Monday night due to a debt load and severe competition from online retailers.
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.
Toyrs "R" Us said Tuesday it has filed for Chapter 11 reorganization in U.S. Bankruptcy Court.
Lawyers for Toys R Us said in court Tuesday that within a week of a news story about the possibility of bankruptcy, almost 40 percent of the company's suppliers refused to ship products without cash on delivery.
This filing only applies to the company's operations in the US and Canada.
Boss Dave Brandon said: 'We are confident that we are taking the right steps to ensure that the iconic Toys R Us and Babies R Us brands live on for many generations.' He said millions of families would visit the firm's stores in the run-up to Christmas.
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The chain could have avoided bankruptcy for another two years but "it would have delayed the inevitable", according to Tuesday court testimony by David Kurtz of Lazard, an investment bank advising Toys "R" Us. Like so many retailers that find it harder to co-exist with Amazon, analysts say Toys R Us needs to improve its online services and offering special experiences in the stores.
With its spacious, high-ceiling 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.
The company wants to assure all its customers and stakeholders that through this process its 82 stores across every province and e-commerce sites toysrus.ca and babiesrus.ca are open for business.
Toys R Us said its European arm was an independent entity and would not be affected by the bankruptcy action in North America. Toys R Us said its Canadian unit also meant to seek reorganization in the bankruptcy court in Ontario.
In time for the holidays, Toys " R " Us Canada will also be moving to free in-store pick up within one hour and offer an expanded ship from store option at stores across Canada to get products to customers even faster. So far this year, more than 300 retailers have filed for bankruptcy, including RadioShack, Gymboree and the Limited.
Mattel Inc closed up 1.2 percent and Hasbro Inc added 1.9 percent. US toy sales rose 6 percent last year on top of a 7 percent increase in the prior year, according to NPD Group Inc., a market research firm. It was being lined up for a stock market flotation, but the plans were scuppered by weak financial performance. That puts more pressure on the later part of the year, when most toy sales occur, for the industry to meet NPD's estimate for a 4.5 percent annual increase. That was the biggest increase since 1999 and was fueled by sales of toys related to several blockbuster movies.
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