Toys ‘R’ Us, the world’s first toy supermarket, is facing potential bankruptcy in the American and Canadian markets following a spate of low earnings in recent years and culminating in the poor Q1 financial reports for 2017.
However, while the retailer scrambles to make ends meet in the northern hemisphere, Australia’s Toys ‘R’ Us is in the midst of a retail boom, with four new stores slated to open nationally in the coming months.
According to USA Today, the American/Canadian division must refinance US$400 million of its crushing US$5 billion debt next year with lenders, and has brought on law firm Kirkland & Ellis in an effort to help restructure the debt.
In a statement Toys ‘R’ Us, spokeswoman Amy von Walter said: “As we previously discussed on our first quarter earnings call, Toys ‘R’ Us is evaluating a range of alternatives to address our 2018 debt maturities, which may include the possibility of obtaining additional financing.”
“We expect to provide an update about these activities, as well as the many initiatives underway to provide an outstanding customer experience in our global retail locations and webstore during the holiday season, during our second quarter earnings call,” she added.
The loss of Toys ‘R’ Us in America would be a huge blow to the local market, not just because the long-standing retailer would leave a gaping, Lego-sized hole in the industry, but according to Global Toy News’ Richard Gottlieb, because the entire industry would lose a place to showcase its new products.
In his article, ‘A World Without Toys ‘R’ Us’, Richard Gottlieb called Toys 'R' Us the closest thing the toy industry has to a national showroom.
“Though some would like to see even more product diversity in the stores, Toys ‘R’ Us, among the major chains, by far offers the country's greatest selection of toys. The opportunity for smaller toy companies to share their wares and for consumers to see them would be sorely missed,” Gottlieb said.
Without any clear indication of what will happen next to the American arm, it is fair to say it will cause ripple effects across the toy industry globally.
Though there is hope yet, as the Australian Toys ‘R’ Us is set to open new stores in Queensland’s Robina and North Lakes, NSW’s Rutherford and Victoria’s South Morang.
At the time of announcement, Toys ‘R’ Us MD Dianne Guerreiro said: “We are committed to giving our customers access to the latest and most exciting toy and baby products in Australia, and with each new location, we can make sure we’re reaching even more toy fans across the country.”
Guerreiro added they will also be recruiting 60 to 80 new staff in each store.
The disparity between the two markets could be caused by a number of factors; some are pointing to Amazon monopolising the US market, while others tout mismanaged funds as the culprit.
Whatever the reason, Toy and Hobby Retailer is keeping a close eye on the developing story, so stay tuned for updates.