Greener BeeGreen HolidaysToys R Us store closings expected after the holiday season

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The timing of the bankruptcy couldn’t be worse as the company gears up for the important holiday season and fourth quarter, which accounts for 40 percent of net sales.
Wochit

WOODLAND PARK, N.J. — With its bankruptcy filing late Monday, Toys R Us bought itself $3.1 billion in new financing that will allow it to stock and operate all of its stores through the crucial holiday season. But after the holidays are over, store closings are inevitable, bankruptcy experts say.

Toys R Us, in court documents filed in support of the bankruptcy petition, also indicated that store closings and a shift to smaller stores are part of its long-term plan.

The company said it is “currently performing a detailed review of their real estate portfolio” and is identifying poorly performing stores and locations where the rents are too high in order to reduce the retail square footage.

The company said it was forced to file for bankruptcy 14 weeks before Christmas and just as it was kicking off its holiday marketing push because toy vendors who were worried about reports of an impending bankruptcy had begun to demand cash payments before they would ship merchandise.

More: The Toys R Us bankruptcy means great holiday deals for toy buyers

More: Toys R Us files for bankruptcy

“The timing of all this could not have been worse,” Toys R Us Chairman and CEO Dave Brandon said in a 47-page statement filed with the U.S. Bankruptcy Court in Richmond, Va.

‘Game of dominos’

The reports, which escalated in early September, that a bankruptcy filing was coming “started a dangerous game of dominos,” Brandon said. By last week, nearly 40% of the company’s toy vendors had refused to ship merchandise without cash on delivery, cash in advance, or in some cases, Brandon said, payment of all outstanding bills. Those actions, he said, left the company with no option but to seek bankruptcy protection.

Brandon said, however, that being able to restructure with the benefit of new financing that will allow it to invest in its stores makes this a new beginning for the 69-year-old company.

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Big-box toy store Toys ‘R’ Us says it plans to keep its 1,600 stores and online shop well-stocked despite filing for bankruptcy protection.
USA TODAY

But bankruptcy experts said that new beginning will also come with some pain.

“No landlord is going to be spared,” predicted Eric Snyder, chairman of the corporate restructuring department of New York law firm Wilk Auslander. The fact that Toys R Us hasn’t announced any store closings yet indicates that it is going to contact all the landlords and tell them if they don’t reduce the rent or improve the terms, “we’re going to leave.”

“They’re going to start from scratch and look at all the leases, and they can save significant money,” Snyder said.

‘Terrible retail times’

In the current environment, with many retailers closing stores, Toys R Us has a lot of leverage with landlords, he said. He expects landlords to be willing to negotiate “because no one wants them to leave,” he said.

“Even though we’re in good financial times, we’re in terrible retail times,” he said.

Brick-and-mortar stores are becoming “unsustainable” for Toys R Us and a growing number of retailers, said Patrick DiNardo, an attorney specializing in bankruptcy and creditors’ rights litigation for the firm of Sullivan and Worcester in Manhattan.

“Unfortunately,” he said, “I think we can expect to see many more shuttered retail locations in our near future,” and that could trigger a commercial real estate meltdown, he said.

Linda Parry Murphy is already feeling the pain from the bankruptcy filing. Her company, Product Launchers, which is based in White Plains, N.Y., with a satellite office in Manhattan, is a sales representative and distributor for manufacturers and imports who sell to Toys R Us. Her clients are owed more than $1 million by Toys, and it looks like they will receive only a small fraction of that amount as a result of the bankruptcy.

“Our clients are the ones getting screwed,” she said. “They’re the ones owed millions and will be lucky to see 10 cents on the dollar. Not every supplier is as large as Mattel or Hasbro, who can more easily absorb this blow.”

Mattel is the largest non-bank creditor listed by Toys R Us in court documents. It is owed $135.6 million by Toys.

Parry Murphy learned Tuesday that she must file a claim for goods and services with the Bankruptcy Court and that Toys R Us is advising vendors to consult with an attorney.

“An initial consultation with a bankruptcy attorney on behalf of our clients is costing us $500 — and that’s just for the first chat,” Parry Murphy said. “Completion of the case is likely to run tens of thousands of dollars — not to mention the hundreds of man hours it will take to gather and submit documentation. Small suppliers simply cannot afford that kind of expense.”

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  • Retail industry has had a miserable 2017
  • Sears' financial troubles extend beyond U.S.
  • Gymboree is filing for bankruptcy and closing up to 450 stores
  • The Children's Place is closing 300 stores by 2020
  • Radio Shack using Twitter to highlight its final days as a brand
  • Michael Kors closing up to 125 stores this year
  • The list's growing: Sears is closing even more stores
  • Clothing retailer Bebe is closing all 180 stores
  • JCPenney delays store closures following sales surge
  • Payless Shoesource is filing for bankruptcy
  • Sears seeks to stem bleeding: closes more stores, sells Craftsman brand
  • Radio Shack files for bankruptcy... again
  • HHGregg to close stores, cut employees
  • Big retailers close hundreds of stores
  • Macy's to close up to 40 stores
  • Expect more store closings despite big holiday sales
  • Famed NYC Carnegie Deli closing
  • Abercrombie  Fitch is planning to close more stores
  • Sports Authority is closing
  • Sears and Kmart to close stores
  • Ralph Lauren closing stores, cutting jobs to save money
  • FAO Schwarz closes iconic Fifth Avenue NYC location
  • Aeropostale will be able to keep 400 stores open
  • Wal-Mart pulls plug on underperforming stores

 

Article source: https://www.usatoday.com/story/money/nation-now/2017/09/19/toys-r-us-store-closings-expected-after-holiday-season/683762001/


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