Retail giant Toys ‘R’ Us, America’s largest toy store chain and one of the 100 largest companies in the world, filed for bankruptcy Monday night as the company struggles under mounting debt.
Toys ‘R’ Us Inc. filed Chapter 11 bankruptcy in the US Bankruptcy Court for the Eastern District in Richmond, Virginia. The company’s Canadian-based subsidiary is also expected to file for bankruptcy in the coming days.
The filing comes ahead of the holiday season shopping frenzy, when retailers – particularly specialty stores focusing on children’s products – make more than half their overall annual sales.
David Brandon, CEO of Toys ‘R’ Us, expressed optimism after the filing, calling it a “dawn of a new era” for the company.
“Today marks the dawn of a new era at Toys R Us where we expect that the financial constraints that have held us back will be addressed in a lasting and effective way,” Brandon said in a statement.
Yet Toys ‘R’ Us has faced serious competition in recent years, as online retailers like Amazon have cut business for traditional brick-and-mortar stores across the US.
With declining revenue and $5 billion in debt to be addressed in the bankruptcy plan, the future of Toys ‘R’ Us’ 1,600 stores and 64,000 employees remains unclear. Even before the bankruptcy filing, the company has been hammering out “restructuring” plans to enable it to pay back the $400 million in debt owed by year’s end. With Monday’s filing, the company will be able to cancel lease agreements for its least cost-effective locations, though it is unclear just how many stores may be closed.