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Toys R Us is in pretty big financial trouble…

September 12th, 2017 by Marc 1 Comment

The toy store giant Toys R Us Inc has hired restructuring lawyers Kirkland & Ellis to help tackle its roughly $400 million in debt due in 2018 – with one potential outcome being the much-loved retailer filing for bankruptcy protection. The e-commerce delivery expert ParcelHero says Toys R Us’ problems reflect the overall collapse of High Street toy shops as online toy sales take a Monopoly of the market.

Toys R Us made a net loss of $164 million in the first quarter of 2017 and has ‘significantly more’ debt due in 2019, according to the US ratings agency S&P. The store is a High Street favourite across the US and the UK; but ParcelHero’s Head of Consumer Research, David Jinks MILT, says: ‘Toys R Us same-store sales have fallen for three consecutive quarters, and its most recent results were down 4.1%. That’s because Toys R Us is in direct competition with online toy sales from the likes of Amazon; and when it comes to the toy market, Amazon isn’t playing around.’

David reveals: ‘Even Toys R Us can’t be immune from the collapse of the High Street or shopping mall. In the snakes and ladders world of retail UK toy shops have been one of the hardest-hit store types of the internet era. Local stores from the huge, award-winning Dominos in Leicester, to Junners of Elgin (116 years old at its death in 2015); and smaller stores such as Kidzone in Bromley, the Cambridge Toy Shop and Hydes in Chorley, have all closed in the last two years.’

Adds David: ‘Toy store chains have not been immune to the impact of the internet. Who now remembers Toy and Hobbys? Toy and Hobbys’ stores were brightly coloured precursors of Toys R Us, with high shelves full of Sylvanian Families and Lego Technic sets.’

Specialist model shops have also closed rapidly since the dawn of the internet era. Beatties’ 60 model shops closed after an ill-advised attempt to enter the well served video games market. After Beatties closure ModelZone became the largest model chain; but it too closed its 47 stores in 2013.

Says David: ‘There’s little doubt the that the UK High Street toy and model stores market is one Toy Story destined for an unhappy ending. The physical store’s toy market has plummeted for five of the last six years and is expected to fall again this year by 1.8%. The key factor is that most toys are available more cheaply and more conveniently online.’

David observes: ‘Toys R Us has the scale to survive the collapse of this sector and survive as the lone High Street toy store chain; but it has had a troubled online presence. Back in 2000 it did a deal with the devil itself and entered into a ten-year agreement with Amazon to exclusively supply toys for the e-commerce giant. But by 2006 Amazon had let other toy stores onto its platform and, after an acrimonious row with Toys R Us, literally threw its toys out of the pram; the deal ended in a bitter lawsuit between the two.’

Concludes David: ‘Toys R Us says it is “evaluating a range of alternatives to address our 2018 debt maturities”; so filing for bankruptcy protection is just one of several options on the table for the company. There are a number of ways Toys R Us can restructure and survive; but back in 2006 most pundits thought Amazon would be the big loser from the collapse of the Toys R Us-Amazon tie-up. The speed of collapse of the High Street toy market shows the rough and tumble of retail is far from child’s play.’

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Marc is a self-confessed nerd. Ever since seeing Star Wars for the first time around 1979 he’s been an unapologetic fan of the Wars and still believes, with Clone Wars and now Underworld, we are yet to see the best Star Wars. He’s a dad of two who now doesn’t have the time (or money) to collect the amount of toys, comics, movies and books he once did, much to the relief of his long-suffering wife. In the real world he’s a graphic designer. He started Following the Nerd because he was tired of searching a million sites every day for all the best news that he loves and decided to create one place where you can go to get the whole lot. Secretly he longs to be sitting in the cockpit of his YT-1300 Corellian Transport ship with his co-pilot Chewie, roaming the universe, waiting for his next big adventure, but feels just at home watching cartoons with his kids….