When toy retailer Toys ‘R’ Us filed its bankruptcy petition in September 2017, its executives said that the chain hoped to prosper during the holiday shopping season and that it would be able to reclaim its financial health in the New Year. The New Year has arrived, and the company has just revealed in a business bankruptcy court filing that it intends to close 182 stores, including a handful in and around Rockland County and New York City.
In a filing in the Bankruptcy Court in Richmond, Virginia, company executives said that the change in plans was caused by a disappointing holiday season. Other retailers experienced robust sales in November and December, but Toys ‘R’ Us described its sales as “disappointing.” The company cited “operational missteps” as the cause of the disappointment, but the missteps were not described. The locations marked for closure represent about 20 percent of the company’s stores in the United States.
Like many big box retailers, Toys ‘R’ Us is struggling to compete with e-commerce rivals, but the chain is facing another hurdle: mountains of debt. Three private investors, Bain Capital, Kohlberg Kravis Roberts and Vornado, bought the company in 2005 in a leveraged buyout. The company then increased it debt load to approximately $5 billion. Following the standard playbook for such deals, the company turned to the Bankruptcy Code to discharge its debts and close unprofitable stores.
Approximately 4,500 workers will be affected by the closings. The company said that it intended to pay bonuses of up to $3.6 million to employees at the stores that will close.
As this shows, business bankruptcy often involves the reorganization of the business, and sometimes this means closing stores. Businesses facing similar struggles may want to explore their options, to determine whether business bankruptcy is right for them.
Source: New York Times, “Toys ‘R’ Us to Close 182 Stores as Part of Restructuring,” Michael Corkery, Jan. 24, 2018