With Millions in Debt, Toys ‘R’ Us Has an Unstable Financial Future

Toys “R” Us has been a reigning toy producer and manufacturer for decades, leaving other toy retailers in the dust. Parents have been known to flock to Toys “R” Us for anything and everything on their children’s wish list, and lines of shoppers always make headlines waiting outside these stories the night of Thanksgiving, looking for the best holiday deals. But, it looks like this retail craze may be over for Toys “R” Us, as they are millions of dollars in debt.

Due to the rise of the online shopper, Toys “R” Us has been suffering slowly but surely throughout the past couple of years. They have consistently been losing business to big box retailers like Walmart and Target, as well as losing out to Amazon.com customers who can purchase anything with the click of a button. All of these losses have added up, and the toy company now needs to find a way to pay back $400 million.

According to reports from the New York Times, the New Jersey-based company is still hoping that they can restructure their debts without having to do anything drastic. They have hired the prominent law firm, Kirkland and Ellis to help with the restructuring, and some bankruptcy experts believe that this points to the idea that bankruptcy may be on the table.

Although the majority of bankruptcies across the nation tend to be personal — back in 2014, 97% were personal and 3% were business — financial analysts say that bankruptcy must be a possibility since this law firm specializes in larger bankruptcy cases.

The $400 million figure only represents their short-term debt. On top of this sum, Toys “R” Us has a staggering $5 billion in long-term debt, but no one knows how this will be paid back as the restructuring process would only focus on the $400 million.

This announcement that there could be a possible change in how Toys “R” Us is run comes at a less than favorable time. The company is prepping for their busy holiday season, during which they tend to bring in the majority of their annual sales. So on top of restructuring their business from the inside-out, Toys “R” Us is going to have to try to increase sales during the busy season from shoppers who aren’t willing to spend.

If they end up filing bankruptcy, Toys “R” Us will be following in the footsteps of other popular retailers. Just this year, Payless Shoesource, rue21, and Gymboree have all filed retail bankruptcy in an attempt to get their companies back on track.

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