Toys “R” Us has reportedly decided to enter into discussions to close an additional 200 stores following the retailer’s decision to file Chapter 11 bankruptcy on September 18, 2017. This decision may cost the company to lose any hope of emerging from the bankruptcy without further damage.
With the closing of 200 additional stores, Toys “R” Us is also cutting a significant number of key staff from its corporate office within the headquarters which is located in Wayne, New Jersey. This comes at a time when the company had previously announced the decision to shutter 182 stores in January 2018. Once the move is implemented for further closings, the iconic toy giant would be reduced to nearly half of the stores previously in operation. A reduction from 880 stores nationwide to almost 400 will certainly have an effect.
The Wall Street Journal first reported the announcement; however, the news has not been supported by a statement from a Toys “R” Us spokesperson. In a previous interview with Fox Business News, Senior Corporate Communications Manager Nicole Hayes said in part: “Our focus is on the reinvention of our business and emergence from Chapter 11. Decisions about our future store footprint and organizational structure will be based on needs of the new business model.” Toys “R” Us received U.S. Bankruptcy approval by Judge Keith Philips to begin liquidation and the going-out-of-business process on Wednesday. According to the plan filed to the court, the liquidation process must be completed by April 15, 2018.
Since the filing of bankruptcy, analysts had already predicted that in order to continue to stay solvent, there would need to be a drastic decision made for shuttering several hundred stores throughout the country. Last year, Toys “R” Us chose to lay off almost 15 percent of the staff at its headquarters.
Analysts say that the decision to close additional stores after sales dropped during the holiday’s, is an effort to stave off further damage caused by an out of date retailer. Ted Gavin, managing partner for a restructuring and consulting firm says, “It’s quite possible that the [bankruptcy] filing led to the problems they are having now…and is causing [them] to close additional stores.” Many experts believe that business with a 30,000 or 40,000 square-foot store in the toy industry is not keeping up with the times for the industry any longer.
Toys “R” Us has not recorded a profit since 2013. The company reported a net loss of $164 million in April 2017 and $126 million during the same timeframe the prior year.