Toys ‘R’ Us to Close 20 Percent of Stores, Expand Focus on Loyalty Programs, Web
WAYNE, N.J. — Toys ‘R’ Us is planning to shutter up to 182 underperforming stores across the country as part of its Chapter 11 bankruptcy reorganization plan.
The planned closings represent about 20 percent of the retailer’s U.S. store fleet, or a collective 6.9 million square feet. The Wayne-based toy chain, which filed for bankruptcy last September, has been fighting to stay relevant amid competition from the likes of Amazon, Walmart and Target.
“Like other retailers, traditional toy retailers have been decimated by multiple forces,” says Peter Braus, managing principal in the New York City office of Lee & Associates. “First, Walmart and Target took away much of the market from specialty toy stores. As Amazon and online retailers began to take a larger and larger share of the market, this became too much for Toys ‘R’ Us and was the nail in the coffin.”
Other retail experts agree that competition in the marketplace is coming from all directions. “Even Barnes & Noble has gotten into the game by adding a large assortment of toys to their sales floor,” says Monetha Cobb, managing director of Franklin Street’s Atlanta office.
Online sales of toys have picked up in recent years, and are continuing to increase. According to a survey from Fung Global Retail & Technology, roughly 14 percent of consumers said they preferred online shopping in 2016, up from 7 percent in 2011.
“An integrated e-commerce platform with better consumer service and unique offerings remain the biggest in-store problem,” says Emil Gullia, executive vice president and principal of Atlanta-based Retail Specialists. “Many big boxes are pushing price as the only catalyst for a visit. That is not enough of an appeal to anyone compared to the convenience of e-commerce.”
Robert Granda, director of retail investment sales at Franklin Street, agrees that convenience tops consumers’ wish lists. “In the advent of major competition, Toys ‘R’ Us has become less convenient for today’s shoppers who are looking to accomplish as much as possible under one roof,” he says. “As e-commerce continues to show its direct impact on many of these ‘dinosaur’ retailers, we can and should expect that this certainly won’t be the last big name to consolidate and really take inventory of performing and non-performing locations.”
Toys ‘R’ Us has said it is focusing on improving the in-store and online experience for its customers, in addition to implementing an improved loyalty program and a more personalized way of communicating through social media.
“The reinvention of our brands requires that we make tough decisions about our priorities and focus,” said Dave Brandon, chairman and CEO of the company, in a statement to customers. “The actions we are taking are necessary to give us the best chance to emerge from our bankruptcy proceedings as a more viable and competitive company that will provide the level of service and experience you should expect from a market leader.”
The company’s debt largely stems from a $6.6 billion buyout in 2005 led by KKR & Co. LP, Bain Capital LP and Vornado Realty Trust. Toys ‘R’ Us has received a commitment for over $3 billion in debtor-in-possession financing from various lenders, including a JPMorgan-led bank syndicate and several of the company’s existing lenders.
Going-out-of-business sales at the affected stores are expected to begin in early February, with the majority of locations closing in mid-April 2018. In addition to closing stores, the retailer plans to convert a number of locations into co-branded Toys ‘R’ Us and Babies ‘R’ Us stores.
Click here to read the full list of store closures, as compiled by USA Today.
— Camren Skelton