Time’s up for Toys R Us in US and UK

Toys R Us will sell or close all of its US and UK stores in coming months.

The decisions, by respective liquidators appointed on both sides of the Atlantic, will leave Canada, Asia and Central Europe up for sale as the last remaining Toys R Us businesses internationally, with operations in France, Spain, Poland and Australia tipped for closure as well.

Toys R Us has 885 stores in the US and employees about 33,000 people there. It had already begun closing about 20 per cent of its outlets as part of a plan to exit Chapter 11 bankruptcy protection.

But no buyer could not be found for the remaining business as a going concern.

Asia appears to be the only region in the world where the Toys R Us business is robust. It is a joint venture with Fung Group, which holds a 15 per cent stake and is reportedly planning a takeover of the business, possibly funded in part by an IPO. But with the brand having failed almost everywhere else in the world, it is unclear how keen investors would be in Hong Kong.  

Neil Saunders, MD of analysts GlobalData Retail, described the liquidation of Toys R Us as “unfortunate but inevitable” given the retailer had lost its way and forgot its core retail competencies.

“Even during recent store closeouts, Toys R Us failed to create any sense of excitement.”

Saunders said management may blame suppliers and competitors for its demise, but the primary responsibility lies with poor decisions.

“As the competitive dynamics of the toy market intensified, management failed to respond and evolve. As such, the brand lost relevance, customers and ultimately sales.

“Admittedly, the leveraged buyout which burdened the company with debt reduced the room for maneuver and left Toys R Us vulnerable. Questions should be asked as to the wisdom of this particular financial transaction which weakened the sustainability of the company.”

The decision to close down Toys R Us was essentially made by its lenders who believed that without a clear reorganisation plan, they could recover more from a liquidation, closing stores and raising money from merchandise sales, according to sources quoted by AP.

The Toys R Us UK operation was placed in administration at the end of last month.

Yesterday, administrator Moorfields Advisory confirmed that no prospective buyer had been found for the business and that all 101 stores would close progressively.

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