The decision by the leadership of Toys 'R' Us to close the company's stores in the United States is no longer fresh news. While adults in New York mourn the loss of a childhood icon, the company's suppliers are wondering if they will receive payments for toys sold to the retailer over the last few months.
Toys 'R' Us has abandoned all attempts at reorganization and is exploring how best to liquidate its remaining assets. In a series of interviews conducted by Reuters, many executives and consultants said that many small toy manufacturers will likely find themselves in bankruptcy along with the giant retailer. The CEO of a large doll manufacturer said that Toys 'R' Us' owes his company $14 to $15 million and that he does not expect the bill to be paid in full. Another toy company executive lamented the loss of an outlet that provided 15 percent of his company's annual sales.
Toys 'R' Us also provided a showcase for toy manufactures. Disney used it to market toy lines intended to accompany hit movies. Smaller toy makers used the company to test new lines of toys. Selling toys requires mass distribution and a physical showcase. The demise of Toys 'R' Us deprives many toy makers of the means of achieving mass distribution and showcasing their products.
Many of Toys 'R' Us suppliers were hoping that the $3.1 billion loan obtained by the company in late 2017 would provide breathing space for everyone, but the company's mediocre holiday sales have dashed those hopes. Many suppliers were a bit shocked that such a powerful retail presence would not survive, but now, these same suppliers are looking to their attorneys for assistance in recovering as much money as possible from what little is left of Toys 'R' Us.
Source: Reuters, "'Exhausted' Toys 'R' Us suppliers weigh options as huge retailer shuts," Tracy Rucinski, Richa Naidu, Melissa Fares, March 17, 2018