Toys ‘R’ Us to sell or close all U.S. stores

By RetailFOXBusiness

Entertainment challenging retail landscape

Marcus & Millichap CEO Hessam Nadji provides insight into the state of the US retail market amid Toys ‘R’ Us telling its workers it will likely close all US stores.

Updated 3/15/18

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Toys ‘R’ Us informed employees on Wednesday that it will close or sell all of its more than 700 U.S. stores amid mounting debt and years of declining sales, on Thursday morning the company announced it will begin "an orderly wind-down of its U.S. business and liquidation of inventory in all 735 of the Company’s U.S. stores, including stores in Puerto Rico" amid a filing seeking Bankruptcy Court approval to begin the process.

David Brandon, CEO of the Wayne, New Jersey-based toy retailer, broke the news to employees at the company’s headquarters. Toys ‘R’ Us’s impending liquidation could result in as many as 33,000 layoffs, according to the Wall Street Journal.

“I have always believed that this brand and this business should exist in the U.S.,” Brandon said on a conference call with staffers, according to the Wall Street Journal. Brandon added that vendors who did not support the brand during a weak holiday sales season would “live to regret” the retailer’s demise.

Toys ‘R’ Us representatives declined FOX Business’ request for comment on the situation on Wednesday evening.

Brandon said Toys ‘R’ Us employees will receive at least 60 days of salary and benefits once stores close. Aside from shutting down U.S. operations, Brandon said the company would also liquidate in France, Spain, Australia and Poland, and sell operations in Canada, Central Europe and Asia, according to the Journal.

Toys ‘R’ Us filed for bankruptcy last September, citing a long-term debt load of more than $5 billion. The company received a $3.1 billion loan to maintain operations through the holiday sales season while seeking potential outside buyers and shuttering about 180 of its U.S. stores.

However, speculation about a potential liquidation surged after Toys ‘R’ Us posted weak holiday sales figures. Bloomberg reported earlier this month that liquidation seemed “increasingly likely” amid a lack of interest from buyers, citing sources familiar with the matter.

The retailer’s collapse would mark the biggest liquidation of its kind since Sports Authority shuttered all of its more than 400 stores in 2016. Like many traditional retailers, Toys ‘R’ Us has struggled to maintain sales amid declining store traffic and the rise of e-commerce competitors like Amazon.

“Toys ‘R’ Us may well blame suppliers and competitors for its demise, but the primary responsibility lies with poor management decisions,” said Neil Saunders, managing director of GlobalData Retail. “As the competitive dynamics of the toy market intensified, management failed to respond and evolve. As such, the brand lost relevance, customers and ultimately sales.”

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