The children’s toy retailer Toys 'R' Us has filed for bankruptcy in the U.S. in an effort to restructure its reported US$5 billion in debt. The company plans to follow suit in the Canadian market.
According to a release from the company, the company filed for protection under Chapter 11 of the Bankruptcy Code in U.S. court, while the company’s Canadian subsidiary will seek relief under the Companies’ Creditors Arrangement Act (CCAA) in the Ontario Superier Court of Justice – the same process taken earlier this year by Sears Canada.
Toys ‘R’ Us is reporting that all 1,600 stores worldwide will remain open and operational for now, in the hopes the company will salvage sales and quell debt in the upcoming holiday shopping season.
"Together with our investors our objective is to work with our debtholders and other creditors to restructure the $5 billion of long-term debt on our balance sheet, which will provide us with greater financial flexibility to invest in our business,” said Dave Brandon, company chairman and CEO, in a statement. “We are confident that these are the right steps to ensure that the iconic Toys ‘R’ Us and Babies ‘R’ Us brands live on for many generations.”
However, the company reported holiday sales have lagged, posting a 3.4 per cent decrease in same-store sales from the 2015 season to 2016. In June, the company reported a net loss of $164 million during the first quarter of 2017, following $126 million in losses during the first quarter of 2016.
