Toys "R" Us files for bankruptcy protection due to debt, relentless competition

BY  | FROM  | 2017-09-20 17:14

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.

Toys "R" Us intends to use these court-supervised proceedings to restructure its outstanding debt and establish a sustainable capital structure that will enable it to invest in long-term growth and fuel its aspirations to bring play to kids everywhere and be a best friend to parents.

"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," said Dave Brandon, Chairman and Chief Executive Officer, in a release regarding the filing.

Toys "R" Us has about five billion U.S. dollars of long-term debt on its balance sheet. Restructuring that debt would give Toys "R" Us the financial flexibility to invest and strengthen its competitive position in an increasingly challenging and rapidly changing retail marketplace worldwide.

The company has received a commitment for over three billion U.S. dollars in debtor-in-possession financing from various lenders, including a JP Morgan-led bank syndicate and certain of the Company's existing lenders.

The filing also showed another example of the relentless online-offline retail competition. E-commerce giants, such as Amazon, have always been peeping at the retail market, and their aggressive pricing have been mounting pressure over brick-and-mortar retail industry.

Analysts said buyers have moved online over the years, as well as choosing home delivery, while discounters like Wal-Mart and Target have captured market share.

To compete with e-commerce giants, traditional retailers as Toys "R" Us would have needed to slash prices to stay on the track.

Toys "R" Us is committed to working with its vendors to help ensure that inventory levels are maintained and products continue to be delivered in a timely fashion.

"We are confident that these are the right steps to ensure that the iconic Toys 'R' Us and Babies 'R' Us brands live on for many generations," Brandon added.

Toys "R" Us, the Wayne New Jersey-based toy retailer, has 1,600 Toys "R" Us and Babies "R" Us stores around world, which are continuing to operate as usual.

The company's operations outside of the U.S. and Canada are not part of protections proceedings.

Meanwhile, the filing of Toys "R" Us' bankruptcy raised people's attention on what would be the future trend of retail industry.

Online tycoons and offline retailers have been neck and neck for years, as each side tries to make its best to stay ahead of the other.

In a recent move, Wal-Mart and Google are teaming up to offer customers a new experience: to order the retail giant's products by voice via Google Assistant, a big step for Wal-Mart to stay competitive in e-commerce age.

While, in a record-setting deal of 13.7 billion dollars in June, Amazon announced the acquisition of Whole Foods Market, which has been under intense pressure from shareholders to improve its financial results.

"I think you're seeing online brands looking to branch into offline, and then offline brands looking to branch into online, and seeing the synergies between the two. The future of retail isn't online, or isn't an offline, it's a bit of matches," Elizabeth Layne, the chief marketing officer (CMO) of Appear Here, told Xinhua in a recent interview.

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