On Tuesday, Toys R Us, Inc. submitted documents to the U.S. Bankruptcy Court which outlines a reorganization plan under its Chapter 11 Bankruptcy filed in September 2017. As a result, the company will be closing 182 stores, renegotiating current lease agreements, and hoping to find a way for the remaining stores to be profitable and reduce debt.
In the documents, the company explains it has conducted an “extensive store-by-store performance analysis of all existing stores,” and concluded that an “overwhelming majority” of the 182 on the closure lists had missed performance goals and experienced ongoing negative sales.
Loss of Jobs
The filing also notes that the closure of these stores will “result in a substantial number of employees being terminated.” In a move to secure some employees, Toys R Us, Inc. requested the authority to pay “store closing bonuses” to preserve adequate numbers of staff to enable the stores to hit targets set for offloading merchandise during the closures. Fire sales can be very chaotic and exhausting for workers, and these bonuses are a way to offset the stress while getting the job done with a higher chance of success.
“The reinvention of our brands requires that we make tough decisions about our priorities and focus,” Toys R Us Chief Executive Dave Brandon said in a letter posted on the company’s website Tuesday night. However, critics say it is probably too late for re-branding and that for years the company has refused to see the writing on the walls with the rise of discount merchants like Walmart, Target, and Amazon who have continually taken much of the market share from Toys R Us, Inc. Heck, the giant, Toys R Us, Inc. fell behind Walmart in toy sales as early as 1998.
Behind the Times
In 2005 Toys R Us, Inc. was privatized in a $6.6 billion leveraged buy-out by a realty trust firm and two private-equity firms which left the company with such a large amount of debt that left them with little or no ability to invest in e-commerce initiatives or update their in-house IT platforms. Both of which were critical for overcoming the unrelenting challenges taking place in retail over the past decade. 
Instead of focusing on finding new ways to compete in the e-retail business, management seemed more intent on buying other toy retailers who were failing. In 2007 they purchased FAO Schwarz, a high-end toy store that had filed for bankruptcy, and then in 2008, they acquired rights to their mall-based rival, KB Toys who was liquidating. Bigger is not always better; not when the debt skyrocketed, market share continued to decline, and profits tanked.
Rebranding and doing it right will be difficult and will require funds that Toys R Us lacks today. There was a time when the big box stores popped up everywhere and put an end to tens of thousands of “mom and pop” small businesses.
At the time, Toys R Us, Inc. was deemed a “category killer” which is defined as a business specializing so thoroughly and efficiently in one sector that it pushes out competition from both smaller speciality stores and larger general retailers. Maybe the tide is changing, and the big box chains are no longer the killers, but will now be the victims of the mega e-commerce and discount companies.
