Toys R Us are at ‘the dawn of a new era’ as they file for bankruptcy protection

Here’s why

Toys R Us have filed for Bankruptcy protection in Canada and the US, the company has 1,600 stores worldwide with over 60,000 staff, there is no current threat to the UK’s 110 stores.

The company has claimed that the chapter 11 filing in Virginia does not affect their operations outside of Canada and the US.

The bankruptcy protection will enable Toy R Us to organise their finances as the pile of debt is $5bn and a $400m bill to pay in 2018.

Dave Brandon the chairman and chief executive, said: “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 in a lasting and effective way.

“Together with our investors, our objective is to work with our debt holders and other creditors to restructure the $5bn of long-term debt on our balance sheet, which will provide us with greater financial flexibility to invest in our business, continue to improve the customer experience in our physical stores and online, and strengthen our competitive position in an increasingly challenging and rapidly changing retail marketplace worldwide.”

Analysts have said the company has struggled with rumours of the ever-growing lack of confidence with their suppliers, stiff competition by online rivals along with their central costs being so high as they are a store focused business.

Th managing director of GlobalData Retail, Neil Saunders, said: “While today’s decision does not necessarily mean it is game over for Toys R Us, it brings to a close a turbulent chapter in the iconic company’s history.

“A combination of high debt and severe structural changes in the industry created a toxic mix against which Toys R Us had little choice but to restructure and try to put itself on a firmer footing.

“The past decade has seen a dramatic change in the domestic toy market with new channels, increased competition, and new technology all having a deleterious impact on the sector and traditional toy stores.

“Unfortunately, Toys R Us has not responded effectively to these challenges and, as a result, has found itself with both a weak balance sheet and falling sales.”