A BROKEN TOY? UPDATE - 33,000 POTENTIAL LAYOFFS AT TOYS WERE US

 Am I Next? Toys R Us Bankruptcy

UPDATE: 3/15/2018

According to published reports the company has informed its employees that retailer may sell or close all its U.S. stores with a mass layoff of up to  33,000 employees in the coming months. The company has filed "liquidation" papers with the authority prior to its bankruptcy hearing. 

Original Post ...

Although entering bankruptcy prior to the holiday season is not optimal, neither is a call on $400 million in maturing debt. Of course, bankruptcy is merely a tool to assist the company in renegotiating and restructuring debt as well as abandoning leases for unwanted brick-and-mortar stores. This debt apparently arises from the results of an older $6.6 billion buyout in 2005 when private equity investors like KKR, Bain Capital, Vornado Realty Trust, and others planned to reorganize the company for a future public offering. Unfortunately, 2008 happened with its mortgage meltdown and subsequent recession. Although the company has experienced ongoing net revenue losses, they still have operational liquidity and a large line of credit.

Competitively, consumers might regard Amazon, Walmart,  and Target as the chain’s major competitors where onecan get a better deal for big-ticket toys that may require returns and/or refunds. Additionally, consumer play preferences have drastically been altered toward online games that can be downloaded and played on the ubiquitous smartphone -- all without a visit to any toy store. 

I would not be surprised to see mass layoffs and store closings in the future as the brick-and-mortar empire downsizes and gives way to the digital domain. Whether or not they can compete effectively with Amazon, Walmart, and Costco remains to be seen.