Economy

Toys "R" Us files for bankruptcy protection in Canada

Toys

First it was Sears, Then K-Mart, JC Penney's and now Toys 'R Us is the latest large retailer to file for chapter 11 bankruptcy protection.

The filing was submitted late on Monday.

The Chapter 11 filing by the biggest US toy store chain, to restructure $5 billion of long-term debt, is among the largest ever by a specialty retailer and casts doubt over the future of the company's 64,000 employees and almost 1,600 stores, which remain open.

"The restructuring is meant 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 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.

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.

The company said it received a commitment for up to $3.1 billion in debtor-in-possession financing from lenders including a bank syndicate led by JPMorgan Chase & Co JPM.N and certain existing lenders.

"Toys "R" Us had little choice but to restructure and try to put itself on a firmer footing, said Neil Saunders, managing director of GlobalData Retail".

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.

Meanwhile, children are increasingly gravitating towards digital toys rather than physical trinkets, he added.

And they say the company should have also thought of new ways to attract more customers in its stores, such as hosting birthday parties.

The toys giant, which employs 2,500 staff at its 110 United Kingdom stores, is among many retailers left playing catch-up after the rapid rise in online shopping.

Brandon said Toys "R" Us was not going to engage in an "unrelenting race to the bottom" by trying to slash prices to compete with Amazon.com Inc AMZN.O , the only company that sells more toys.

The new stores are in addition to the seven Mastermind has already opened this year, while since 2011 the retailer has opened 50 new toy stores as it expands out of Toronto to now have stores in seven provinces.

While toy sales overall have held up fairly well, they are shifting toward discounters and online companies. US toy sales rose 6 per cent last year on top of a seven per cent increase in the prior year, says NPD Group Inc., a market research firm. That was the biggest increase since 1999 and was fuelled by several blockbuster movies.



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