Toy store chain Toys R Us is planning to sell or close all 800 of its U.S. stores, affecting as many as 33,000 jobs as the company winds down its operations after six decades.
A source familiar with the matter confirmed the news to The Washington Post, and The Wall Street Journal reported Chief Executive David Brandon delivered the company's fate to workers at its Wayne, N.J., headquarters.
"I have always believed that this brand and this business should exist in the U.S.," Brandon said on a follow-up conference call with staff members, adding that he guarantees that vendors who failed to support the retailer during the holidays and customers who shopped elsewhere will miss the retailer.
They "will all live to regret what's happening here," Brandon said, according to the Journal.
The news comes six months after the retailer filed for bankruptcy. The company has struggled to pay down nearly $8 billion in debt -- much of it dating back to a 2005 leveraged buyout -- and has had trouble finding a buyer. There were reports earlier this week that Toys R Us had stopped paying its suppliers, which include the country's largest toy makers.
In addition to shutting down U.S. operations, Brandon told staffers the company was likely to liquidate in France, Spain, Poland and Australia, The Wall Street Journal reported. It plans to sell its operations in Canada, Central Europe and Asia. The company is also trying to package its Canadian business with 200 U.S. stores and find a buyer, the CEO said.
"We're putting a for sale sign on everything," Brandon told employees. "Frankly, all anyone has to do is offer one dollar more" that is being offered by liquidation firms. The company will pay workers at least 60 days of salary and benefits.
In the United States, the company told employees closures would occur over time, and not all at once, the source told the Post.
Toys R Us, once the country's pre-eminent toy retailer, has been unable to keep up with big-box and online competitors. The recent holiday season dealt another blow to the embattled company, which struggled to find its footing even as the retail industry racked up its largest gains in years. In January, Toys R Us announced it would close 182 U.S. stores, or about one-fifth of its remaining locations.
Bloomberg reported on Thursday that the move was imminent, following unsuccessful attempts by the company to either find a buyer or reach a debt restructuring deal with lenders. Toys "R" Us's U.K. unit is also closing down after a bidder failed to emerge, but there's still hope for the Canadian operations. A group led by MGA Entertainment Inc. is contemplating a bid for that business.
Brandon told employees there were interested buyers for Canada, which has about 80 stores, the person said. He also said that deal could lead to some U.S. stores staying open and being run by the Canadian unit, according to the person.
Despite turnaround efforts at Toys R Us, which included adding more hands-on "play labs," retail experts say the 60-year-old company has been unable to get customers back into its stores. It doesn't offer the low prices or convenience of some of its larger competitors, nor the fun-filled experience that many smaller outfits do, some analysts have said.
Toys R Us, based in Wayne, New Jersey, has been struggling for years to pay down billions of dollars in debt as competitors like Amazon, Walmart and Target win over an increasingly larger piece of the toy market. Its bankruptcy filing cited $7.9 billion in debt against $6.6 billion in assets. The company said it has more than 100,000 creditors, the largest of which are Bank of New York (owed $208 million), Mattel ($136 million) and Hasbro ($59 million). (Jeff Bezos, the founder and chief executive of Amazon, owns The Washington Post.)
"The liquidation of Toys R Us is the unfortunate but inevitable conclusion of a retailer that lost its way," Neil Saunders, managing director of the research firm GlobalData Retail, wrote in an email. "Even during recent store closeouts, Toys R Us failed to create any sense of excitement. The brand lost relevance, customers and ultimately sales."
At its heyday, Toys R Us had a towering flagship store in New York's Times Square (now closed and home to Old Navy) and a ubiquitous icon, Geoffrey the Giraffe.
"We know that customers are willing to pay more for an enjoyable experience -- just look at the lines at Starbucks every day -- but Toys R Us has failed to give us anything special or unique," said O'Keefe, the Virginia Commonwealth University professor. "You can find more zest for life in a Walgreens."