Toys 'R' Us files for bankruptcy amid online retail challenges

By Sara Shayanian  |  Sept. 19, 2017 at 9:23 AM
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Sept. 19 (UPI) -- Toys 'R' Us announced Tuesday that it's voluntarily declared bankruptcy, but will keep many of its stores open.

Filing for Chapter 11 bankruptcy "will enable it to invest in long-term growth and fuel its aspirations to bring play to kids everywhere and be a best friend to parents," Toys 'R' Us said in a statement.

The company said it intends to use the court proceedings to restructure its debt and establish a sustainable capital structure.

Operations outside of the United States and Canada, however, are not a part of the filings. The toy store plans on keeping its approximately 1,600 Toys 'R' Us and Babies 'R' Us stores open worldwide, noting that they are still profitable.

"Today marks the dawn of a new era at Toys 'R' Us where we expect that the financial constraints that have held us back will be addressed in a lasting and effective way," Chairman and CEO Dave Brandon said.

The statement notes that the company's online stores will also continue to do business.

Toys 'R' Us, extremely popular and profitable in the 1980s and 1990s, has seen increased competition from stores like Amazon and Walmart. Toy sales have continued to do well, but discount stores and online competition have given retailers like Toys 'R' Us some trouble. Toy brands like LEGO have had to lay off more than 1,000 workers due to profit decreases.

Analysts say Toys 'R' Us has not had the financial flexibility to invest in attracting new customers or online sales.

Toys 'R' Us has received a $3 billion debtor-in-possession from various financial lenders, which should improve the company's financial health and support its ongoing operations.

Brandon said the restructuring plan will give the company more financial flexibility to invest in growth.

"We are confident that these are the right steps to ensure that the iconic Toys 'R' Us and Babies 'R' Us brands live on for many generations," he said.

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