Wednesday, January 24, 2018

Toys ‘R’ Us Closes 20% of Stores

While we wait for a restructuring plan from Toys ‘R’ Us, the clock is ticking, and the bankrupt retailer had to make some quick decisions about store closings. The store closing plan (PDF) filed last night in bankruptcy court and pending court approval, would close about 180 Toys ‘R’ Us and Babies ‘R’ Us locations, about 20 percent of stores. The store closing list (PDF pages 72-74, 82) includes many locations where the two stores are located together. In total, 79 Toys ‘R’ Us stores, 126 Babies ‘R’ Us stores, and one outlet store will close.

The affected stores are expected to completely liquidate between early February and early April. I have seen photos from December of nearly bare shelves in Toys ‘R’ Us stores, so there will not be as much stock to liquidate as you would normally expect to see in a store closing. It will not be a surprise if workers move the remaining toys to a small area at the front of the store to make it easier for shoppers to find the merchandise.

Deciding what stores to close is not the same as writing a restructuring plan, and only the legal deadlines provide assurance that such a plan is on the way. The store closing plan and the simultaneous letter to loyal customers point to the principles in play as the company tries to forge a plan, but these early documents provide little insight into the practical steps that must follow. Toys ‘R’ Us went into bankruptcy without a plan and then suffered a disastrous December in stores. It is suffering not just from a high debt load and its own missteps, but also from larger trends unfavorable to toys, children’s books, and movie tie-ins. These headwinds make it unlikely that a toy retailer can increase revenue no matter how well-managed it is.

There is little margin for error, then, as Toys ‘R’ Us writes its plan, yet everything we have seen so far has the air of procrastination and resistance – errors that would tend to leave a struggling company too large and too fragile to survive after its restructuring. It is hard for me to imagine how Toys ‘R’ Us can rebuild its customer experience as it says it must while operating for the next five years or longer at a loss.

But those details will follow. For now, closing 20 percent of stores is a step forward that, as the company put it in its letter to customers, gives it a better chance of carrying on.

Toys ‘R’ Us stores closing
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Babies ‘R’ Us stores closing
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Toys ‘R’ Us outlet store closing
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Posted by at 11:30 AM