Toys R Us to Close Stores but Asian Business Unaffected

By Joyce Yu

Philadelphia, PA–Following filling bankruptcy protection four months ago, Toys R Us is planning to close roughly 180 stores across the country, about one-fifth of its U.S. store fleet, to restructure the company and emerge from bankruptcy protection.

In his note to customers, David Brandon, Chairman and Chief Executive Officer, wrote, “The reinvention of our brands requires that we make tough decisions about our priorities and focus. The actions we are taking are necessary to give us the best chance to emerge from our bankruptcy proceedings as a more viable and competitive company.”

Toys R Us had a challenging Christmas shopping season in the U.S. and overseas, Chief Executive Officer Dave Brandon wrote in a letter to employees, according to the Bloomberg News. While the bankruptcy hurt customer confidence and disrupted other parts of the business, the company has made operational mistakes that need to be fixed, he further said.

UBS notes in its memo issued last December that out of Toys R Us’ roughly 880 store fleet in the U.S., 183 stores (including those under the Babies R Us nameplate) have at least one other Toys R Us store within a 15-minute drive. The targeted stores to be closed accounted for $925 million in sales in 2017, according to the filing.

The closures still need court approval, documents show, but management is planning to shut those locations beginning in early February and running through mid-April, according to CNBC. 83 locations in Canada won’t be impacted by Tuesday’s news. With intensified competition from the likes of Amazon, Walmart, and Target, Toys R Us filed for bankruptcy protection just four months ago as its sales were declining and debt was piling up. It has also struggled meeting consumers’ needs online.

In contrast to its poor performance in the U.S., Toys R Us remains optimistic about its operations in Asia. China is the fastest growing market for Toys R Us Asia, a joint venture between Toys”R”Us and Fung Retailing Limited. It has two online stores and 134 physical stores in 55 cities in China by the end of April, 2017.

In an interview with China Daily conducted in mid-2017, Roy Sammartino, managing director of Toys “R” Us China, said: “China is our fastest-growing market with more store openings than anywhere else in the world.” In China, the total toy and game market was worth 218 billion yuan ($31.6 billion) in 2016. Traditional toys and games accounted for around 70 billion yuan, according to Euromonitor.

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