Dive Brief:
- Since filing for bankruptcy, Toys R Us still has not announced its plans to close stores during the Chapter 11 process. But it has hired a liquidator to help with store closures.
- On Tuesday the toy retailer asked the court overseeing its bankruptcy to approve an agreement with Malfitano Advisers, led by principal Joseph Malfitano, according to a filing from Toys R Us' attorneys. The retailer is tapping Malfitano to liquidate inventory, furniture, fixtures and equipment, as well as coordinate store closures and find buyers for assets and operations Toys R Us plans to sell, including stores. The filing indicated Toys R Us has already identified some stores it plans to close.
- Bloomberg and others reported in December that Toys R Us was considering shuttering 100 to 200 stores in the U.S. That represents potentially more than 20% of the retailer's domestic footprint. In early December, Toys R Us announced it would close about 25% of its United Kingdom stores. A Toys R Us spokesperson said the company "is currently in the process of reviewing its real-estate portfolio with the assistance of outside advisors, including firms that specialize in inventory clearance," and noted that, "any speculation about potential store closures at this time is premature and likely to be inaccurate."
Dive Insight:
Several retailers in 2017 — including Payless, Gymboree, rue21 and True Religion — went into Chapter 11 with detailed plans to shed debt and close stores.
Given the relatively short time frame dictated by law for bankrupt firms to exit leases during the process, such a plan can be crucial to coming out on the other side of a bankruptcy filing as a healthy business or even a going concern.
Toys R Us went into bankruptcy without a plan. In September, CEO David Brandon attributed this to what he said in a court filing was the unexpected nature of the bankruptcy, as the toy retailer's vendors began pressing en masse for stricter financial terms, creating a sudden liquidity crisis.
The toy retailer almost undoubtedly needs to close stores if it's to have a chance at financial health, after years of losing market share to mass merchants and grappling with a debt load leftover from its private equity buyout more than a decade ago.
But closing hundreds of stores would likely benefit Target, Walmart and Amazon — the same companies that have burned Toys R Us so badly in recent years — analysts have noted.
Even as Toys R Us works with an injection of capital (thanks to its bankruptcy) and tries to make itself more competitive online and in its stores, the company is still getting beat handily on price and is losing important shoppers, according to data provided to Retail Dive.
