'Dawning of a New Era' With Toys R Us Bankruptcy

'Finally, the straw broke the camel's back'
By Rob Quinn,  Newser Staff
Posted Sep 19, 2017 4:54 AM CDT
Toys 'R' Us Files for Bankruptcy
Shoppers shop in a Toys R Us store on Black Friday in Miami last year.   (AP Photo/Alan Diaz, File)

More trouble in the world of big-box stores: Toys R Us, hobbled by a huge debt load and struggling to compete with online retailers, has filed for Chapter 11 bankruptcy protection. Dave Brandon, chief executive of the world's biggest toy store chain, describes the move as the "dawning of a new era," the Guardian reports. Brandon says the "financial constraints" that have held the company back" will be "addressed in a lasting and effective way." The chain, which has secured more than $3 billion in financing to turn itself around, says the vast majority of its almost 1,600 stores are still profitable and it will remain open for business as usual to "put huge smiles on children's faces" during the holidays, reports the BBC.

Analysts say the cost of "brick and mortar" stores and competition from the likes of Amazon has hit Toys R Us hard, but the real problem is the massive debt load it has carried since a $7.5 billion leveraged buyout in 2005, when investors including private equity firm Bain Capital loaded the company up with debt to take it private. "This filing is really a buildup of financial problems over the past 15 years," an industry analyst tells Bloomberg. "Finally, the straw broke the camel's back." He says, however, that the chain still has a lot of promise, and it could be making up to $600 million a year in profit if its debt were under control. As it was, the company was paying almost that much interest some years. (More Toys 'R' Us stories.)

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