Toys 'R' Us, the largest U.S. toy store chain, filed for bankruptcy on Monday after struggling for years to pay off billions of dollars in debt.
Following its 2005 buyout by private equity firms Kohlberg Kravis Roberts and Bain Capital, and real estate firm Vornado Realty Trust for $6 billion, the company was already on the decline as it failed against its competitors and tried to remain relevant in an era of online shopping.
Analysts cited that its more notable attributes to failure were poor in-store customer service, a second-rate website and prices that are often higher compared to its competitors, reports The Washington Post.
With 1,600 Toys "R" Us and Babies "R" Us locations spread across the nation, the company shared that all would operate “as usual,” and that it would work with its investors to address its debt of around $5 billion.
“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,” Dave Brandon, chairman and chief executive of Toys R Us, said in a statement. “We are confident these are the right steps to ensure that the iconic Toys ‘R’ Us and Babies ‘R’ Us brands live on for many generations.”
Neil Saunders, managing director of GlobalData Retail also shared that the Toys 'R' Us bankruptcy “brings to a close a turbulent chapter in the iconic company’s history,” And adding, “Even if the debt issues are solved, Toys ‘R’ Us still faces massive structural challenges against which it must battle. The jury is out as to whether it can adapt enough to survive.”
Furthermore, according to GlobalData Retail, many children and teenagers would rather buy smartphones and tablets, or apps and games for those devices, instead of traditional toys.
“For many children, electronics have become a replacement for traditional toys,” Saunders said. “With the high price tag, there is often little left over — either from the child’s budget or the gifting budget of parents and family — to spend on other toys.”
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