By: Rene Ray De La Cruz
VICTORVILLE — The extinction of Toys R Us has begun. The iconic and financially ailing retail giant announced it would begin to shutter or sell every store in the U.S. market.
Toys R Us officials broke the news to their employees on Wednesday, a message that also threatens up to 33,000 American jobs in the coming months, the Wall Street Journal reported.
The company plans to file liquidation papers Wednesday evening in advance of a bankruptcy court hearing on Thursday, with Chief Executive David Brandon telling staffers the company is likely to also liquidate its stores in France, Spain, Poland and Australia.
The company also plans to sell its operations in Canada, Central Europe and Asia. Additionally, the company is trying to package its Canadian business with 200 U.S. stores and find a buyer, Brandon said.
“We’re putting a for sale sign on everything,” Brandon told employees. “Frankly, all anyone has to do is offer one dollar more” that is being offered by liquidation firms. The company will pay workers at least 60 days of salary and benefits.
Outside the U.S., the chain has another roughly 800 stores. Altogether, court papers show Toys R Us has roughly 1,600 stores globally, with approximately 60,000 employees. That number reaches more than 100,000 during peak holiday season, the WSJ reported.
Blowout clearance sales could also begin soon after weak holiday sales halted the company’s plan to restructure the business through bankruptcy proceedings, according toCorali Lopez-Castro, a bankruptcy lawyer and managing partner at KozyakTropin and Throckmorton,
When it comes to liquidation, the New Jersey-based company “is not going to want to drag this out,” Lopez-Castro told Business Insider. The longer the stores stay open, the more rent Toys R Us will owe to its landlords. The company would only need a few weeks to heavily advertise the sales before kicking them off.
It was business as usual on Wednesday inside the Toy R Us on Amargosa Road in Victorville, where dozens of shoppers walked the aisles looking to purchase Legos, bicycles, dolls, video games, Play-Doh, Easter accessories and more.
Several customers told the Daily Press they hadn’t heard of the company’s financial woes, which includes Toys R Us missing a payment to some of its vendors this week and not making an annual profit since its 2013 fiscal year, mainly due to interest payments.
“I knew Toy R Us was having financial problems, but I didn’t realize it was this bad,” said Hesperia resident Angie Simon, 31, who was at the store with her daughter and mother. “We don’t shop here all the time, but today we’re looking for Easter grass, baskets and plastic eggs.”
Several store employees, who wished to remain anonymous, said they were not given details on the future of the High Desert store or the company.
“I am still in shock over hearing the news, and hoping this is just a really bad April Fools joke or perhaps a really strange marketing scheme to get people scared and start shopping at Toys R Us again,” said customer Crystal Lamphere.
“I have been a Toys R Us kid since the age of 3. My parents took me and my sister every other Friday, sometimes to treat us to a surprise. Even when we just went to look at the toys, I would imagine what adventures we could have when the toys finally found their way to our house. It was always a magical experience.”
Toy manufacturers have grown anxious over the possibility of losing the toy retailer, which is a key selling channel that carries a much larger scope of their products than the likes of Target and Walmart. Some smaller companies have also been concerned about lenders pulling lines of credit if Toys R Us goes away, the Wall Street Journal reported.
“Through the years, the success or failure of a toy line was largely determined by Toys R Us and the chain gave small, independent toy companies a chance to sell and market their ideas and products in a way that other retail establishments couldn’t,” said Lamphere, the former co-owner of QBC Toys in Victorville.
Toys R Us started the year by announcing it would close 184 of its more than 800 stores in the U.S. — under both the Toys R Us and Babies R Us brands. The Victorville store was not on the list of the 27 California locations the company announced they would close.
The downfall of Toys R Us can be traced back to a $7.5 billion leveraged buyout in 2005 that loaded the company with debt, according to Bloomberg, who reported the retailer was able to refinance its debt and delay its day of reckoning.
Despite generating $11.5 billion in sales in 2016, the company could not recover from its interest payments that sucked up resources and online competition from Amazon.com, Walmart and other companies. In the 12 months since, through September 2017, company sales had declined 5 percent.
Besides leaving Toys R Us fans with nothing but fond memories of store visits and Geoffrey the Giraffe, the demise of the company may also find landlords looking to fill millions of empty square feet of commercial real estate.
“Where are the kids going to buy their toys and where else can they walk into a toy store with the look of awe and amazement at the many aisles of toys displayed as if every toy was displayed just for them?” Lamphere asked. “The beautiful look of wonderment and fantasy? Other retailers such as Walmart, Target and Amazon don’t offer that experience. This is such a blow. I will always be a Toys R Us kid.”
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