Toys R Us Files for Bankruptcy

Not long ago, we wrote a blog post about Toys R Us’ financial troubles and how the retailer was toying with the idea of filing for bankruptcy. On September 18th, 2017, it was made official: Toys R Us filed for Chapter 11 bankruptcy.

According to the retailer’s chief executive, Toys R Us and Babies R Us will continue to operate as usual. He also claimed that the company is entering a new, more fruitful era. The company is using Chapter 11 to manage its $5 billion in long-term debt, which it has accrued as the retail landscape has changed over the past two decades to include box stores like Walmart and Target and ecommerce.

Chapter 11 can be Just a Chapter in a Company’s Story, Not the Epilogue

Chapter 11 bankruptcy is a way for companies to manage their debt by restructuring. This can mean making changes to their supply chains, replacing key individuals, altering how they market their products and who they market them to, and changing course on long-term business development plans. Because of this, Chapter 11 is often known as reorganization bankruptcy.

Toys R Us is hardly the only traditional retailer looking to expand its ecommerce offerings, nor is it entering the ecommerce world late in the game: in 2000, Toys R Us paired with Amazon.com to handle its toy sales. Four years later, though, it filed a lawsuit against Amazon, alleging that it breached their agreement terms. Though the court ruled in favor of Toys R Us, Amazon is still a world leader in ecommerce.

Toys R Us’ Strategies to Bring Shoppers Back

One of the strategies Toys R Us is testing to bring shoppers back into its stores is offering live events, such as music classes for children. If it wants to bounce back, it will need to do this and make other changes that bring it into line with what today’s consumer wants. Ecommerce is key: financial services firm Cowan predicts that in 2017, 41% of all toys and games purchased in the United States will be purchased online. Only eight years ago, this figure was approximately 20%.

Despite Toys R Us filing for bankruptcy, the 2017 holiday season is expected to come and go as normal. Toy industry sales are expected to meet their targets for this year.

Work with an Experienced Rolling Meadows Bankruptcy Lawyer

As a business owner, there is a lot you can learn by reading the latest news stories about how large companies handle their debt, with and without bankruptcy. If you are considering filing for bankruptcy, first speak with an experienced bankruptcy lawyer to learn more about the process and determine if it is the right choice for your company. To get started, contact our team of bankruptcy lawyers at Newland & Newland, LLP today to schedule 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 Jackson Jost)

  • Newland & Newland LLP, Attorneys, Arlington Heights, IL
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