By: Josie Rhodes Cook
Bad news, parents. There are some reports that Toys “R” Us may close all of its U.S. stores, after holiday sales failed to help the toy retailer bounce back from filing for bankruptcy in the fall. Right now, the only thing that’s certain is that Toys “R” Us Inc. is preparing to liquidate its bankrupt United States operations after failing to find a buyer or reach a debt restructuring deal with lenders, according to Bloomberg. But experts say the future of the popular toy store looks bleak.
Taylor O’Donnell, a Coordinator for Corporate Communications at Toys “R” Us, tells Romper via email on Friday, “We do not have a comment to share at this time.”
Toys “R” Us is preparing to potentially close all U.S. stores following weak holiday sales, according to Business Insider. And that means blowout liquidation sales at all of the company’s roughly 800 stores could begin within weeks, according to Corali Lopez-Castro, a bankruptcy lawyer and managing partner at KozyakTropin and Throckmorton who spoke with Business Insider. And while that might sound like good news to parents and families in the short term (yay! toy sales!), the closing of Toys “R” Us could have a ripple effect that could damage the toy industry and change the way toys are sold forever, and that’s not-so-great news.
Sources told CNBC that Toys “R” Us may soon liquidate its U.S. operations, but at least one person cautioned that “the situation remains fluid,” so it’s really anyone’s guess what could happen next. But in general, if sales and expectations haven’t bounced for the company yet, it’s not looking good for the stores’ future, and the little girl in me who used to eagerly look through Toys “R” Us catalogs as a kid is a bit devastated, to be honest.
If Toys “R” Us Inc. does move forward with liquidating, Lopez-Castro told Business Insider that, “Toys R Us is not going to want to drag this out.” The outlet reported that the longer the stores remain open, the more rent Toys “R” Us will owe to its landlords — and that wouldn’t be a smart move or at all sustainable for a company that owed debt to the tune of $5.2 billion in September, according to Reuters.
But CNBC noted that Toys “R” Us “accounted for 15 to 20 percent of U.S. toy sales last year,” and if the retailer does close all of its stores here in the States, those toy sales won’t all be absorbed by other retailers in the aftermath. In fact, around 10 to 15 percent of that volume of sales would simply “fall through the cracks and be lost for good,” the outlet reported.
A lot of products would shift to being sold through channels like Amazon or Target instead, so it’s not as if parents need to panic over not being able to find toys easily just yet. But toy giants like Hasbro and Mattel are even nervous, and they’ve got a lot more power than small toy brands, which could be in trouble.
The way CNBC explained it, because Toys “R” Us is so massive, it can sell both name-brand toys and products from smaller, less commercially successful toymakers. But if Toys “R” Us closes, other big-box retailers probably won’t take in those smaller brands because they already have limited space in toy sections. So small toy manufacturers will have more trouble succeeding, and that’s a shame for kids everywhere who would miss out on the creativity and innovation of more small-scale designers and inventors. Not everyone can turn to Shark Tank, after all.
The closure of all U.S. Toys “R” Us locations could be either good or bad for more suburban or rural communities where Toys “R” Us may be the only game in town when it comes to toy stores. There’s a chance that smaller, independent toy stores could pop up in their wake. Or there’s a chance that for parents with limited options, online shopping may become their only choice.
Nothing is set in stone yet. We know for sure that several U.S. Toys “R” Us stores have closed, or will close soon. But as far as the news that every store in the U.S. could shutter, that’s still based mostly on sources, and I suppose there’s a chance a buyer could swoop in at the 11th hour and save Toys “R” Us. But if that doesn’t happen, we might have to say goodbye to Toys “R” Us forever. It could truly be the end of an era for a lot of people who grew up loving the toy retailer.
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