As the holiday season looms, retailers across the nation and their suppliers across the globe are gearing up for their busiest season of the year. The holiday season can be an opportunity for struggling retailers to get out of debt, but it can also be a devastating blow for retailers who cannot make the numbers they need by the year’s end.
Toy retailer Toys R Us is currently facing a significant level of debt that is pushing it to consider bankruptcy. However, no concrete bankruptcy plans have been announced. Some of its suppliers have reduced their shipments to the retail chain because the cost to insure the shipments has become very expensive. Generally, vendors are a low priority for repayment among a filing company’s creditors when the company files for bankruptcy.
The Importance of the Holiday Season for Toys R Us
For most Americans, Christmas means piles of gift-wrapped toys under the tree. It should be no surprise to anybody with this image of Christmas that Toys R Us make about 40% of its annual sales during the fourth quarter of the year.
Because the holiday season is approaching quickly, the New Jersey-based toy retailer is trying to refinance its debt quickly. Right now, its debt sits at approximately $400 million. It is currently in discussions with its lenders to secure a new loan that would allow it to remain in operation while it works out its debt issue through bankruptcy proceedings. The company is not completely unprofitable. In 2016, it brought in $790 million before taxes, amortization, interest, and depreciation. It still is a popular retailer for shoppers seeking toys, video games, and other children’s products.
Competition from Box Stores and Online Retailers
The struggle Toys R Us faces is not unique. Its top competitors are Walmart and Amazon, two retailers that have played large roles in altering our retail marketplace. A change to how and where shoppers make their purchases does not necessarily mean the end of traditional retailers like Toys R Us, but a need to adapt to the market’s current needs. Obtaining the loan it seeks and completing the bankruptcy process could be exactly what the company needs to successfully manage its debt. For businesses, Chapter 11 bankruptcy is a tool that makes it possible to reorganize a company’s operation, cut out strategies that are not working, and implement new strategies that could work while eliminating the debt that holds it back.
Work with an Experienced Buffalo Grove Bankruptcy Lawyer
Bankruptcy is not the only option for many struggling companies. If you are considering filing for Chapter 11 or another form of bankruptcy, first speak with one of the experienced bankruptcy lawyers on our team at Newland & Newland, LLP. Call us today or visit us online to set up your initial consultation in our office. We serve clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas.
(image courtesy of Markus Spiske)