Toys R Us Announces More Store Closures
Toys R Us Inc. has announced plans to close more stores and lay off a significant portion of its corporate staff. The company recently announced plans to close about 180 stores, which would affect approximately 4,500 workers. The number represents about 20 percent of its U.S. store fleet.
People familiar with the matter say that the discussions about the store closings are continuing and the number could change. Toys R Us spokeswoman Amy von Walter said, “Decisions about our future store footprint and organizational structure will be based on needs of the new business model.” Store-closing sales began Feb. 7.
With the latest wave of closings, the number of U.S. stores it had before its bankruptcy filing would be cut nearly in half. Before its bankruptcy filing, it had about 1,600 stores worldwide, including about 800 in the U.S. The company had approximately 11,150 full-time employees and 21,300 part-time workers as of the bankruptcy filing.
A promise made in January to offer severance to all affected employees has apparently been walked back by the company. According to reports, managers were recently told to tell their hourly employees that “there are no severance benefits being provided for the store-closing process.”
Toys R Us sought bankruptcy protection in September, blaming a hefty debt load and increased online shopping for its declining fortunes. Many shoppers have moved to Amazon and huge chains like Walmart that offer to ship products directly to their door cheaply.
The debt load is a legacy of a 2005 leveraged buyout by private-equity firms Bain Capital and KKR & Co. and real-estate investment trust Vornado Realty Trust. The debt was secured in large part by the company’s assets.
The move comes after a disappointing holiday sales season for the retailer. Toys R Us says that holiday sales were significantly weaker than expected. According to the sources, store sales dropped by 9 percent and online sales fell by roughly 20 percent. The company has yet to release its holiday earnings.
Toys R Us remains one of the top brick-and-mortar toy retailers after Walmart and Target. Its bankruptcy financing has allowed the company to remain in business while it reorganizes in U.S. Bankruptcy Court. The retailer has not breached any of the covenants governing its financing, the spokeswoman said.
If the company was forced into liquidation, it could result in the closure of the entire chain. Attorneys for the lenders and creditors have repeatedly told the bankruptcy court that it is in everyone’s best interests that Toys R Us survives. The company has said it plans to emerge from bankruptcy before the 2018 holiday.