Toys ‘R’ Us filed for bankruptcy protection late Monday in a move that echoes a larger challenge faced by brick-and-mortar retailers.
But filing for bankruptcy — particularly Chapter 11 bankruptcy, in the case of Toys ‘R’ Us — does not mean the largest toy store chain the U.S. is now going out of business.
By filing for Chapter 11 bankruptcy, Toys ‘R’ Us is aiming to relieve itself of billions of dollars of debt and restructure its financial model and customer experience in order to keep its business alive. “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,” said Dave Brandon, the company’s chairman and CEO, in a statement.
Indeed, the company says its 1,600 Toys ‘R’ Us and Babies ‘R’ Us stores around the world and websites selling its products will still operate as usual.
Chapter 11 bankruptcy is typically filed by businesses with the hopes of restructuring and reorganizing to not only reduce its debt but also lessen its expenses. Toys ‘R’ Us filed for bankruptcy protection voluntarily in a federal court in Richmond, Va. Its stores in Canada will also seek bankruptcy protection through the country’s court system, but the 225 stores outside of the U.S. and Canada are not part of the filings.
Toys ‘R’ Us still faces a tough road ahead as it faces competition from giants like Amazon and Walmart, which have adapted to the changing retail landscape. The company has received $3 billion from previous lenders and a JPMorgan-led bank syndicate that will help “immediately improve” the businesses’s financial issues and operations, according to Toys ‘R’ Us.
“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,” Brandon said.
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