Toys R Us is on the verge of collapse.
According to this Forbes report hundreds of layoffs have hit their corporate headquarters.
The company is struggling with $850 million in debt, making bankruptcy a possibility in the next few years.
For decades, Toys “R” Us has stood as one of the most reliable and iconic sources of childhood glee. Now, that tradition is on shaky ground. This Friday, the company announced they had laid off between 10-15% of their home office employees out of Wayne, New Jersey — approximately 250 jobs were eliminated.
Amy Von Walter, Toys “R” Us EVP of Global Communication and PR, stated that, ”The recent changes are not just about cost-containment—our growth plans require us to have the right structure, talent and determination to transform our business and achieve the financial objectives we’ve set for the company.”
A long time coming
Toys “R” Us, or TRU, has been struggling financially for some time. In 2005, investors led by KKR & Co., Bain Capital, and Vornando Realty Trust bought out the company for $6.6 billion. In 2016, the business refinanced its remaining $850 million debt load, allowing investors holding bonds maturing in 2017 and 2018 to swap their holdings for those maturing in 2021.
Multiple factors are contributing to Toys R Us’ problems. Like other retailers, TRU has struggled to find new ways of operating as consumers shift to more online buying. People simply aren’t trekking to the malls that previously helped the toy chain dominate. Plus, savvy competitors like Walmart and Target have tripled their toy aisles & seasonal offerings during holiday season, allowing customers to cross TRU off the store list.
Amazon also cuts into sales as a major competitor, but it’s particularly painful as Toys R Us has historically had trouble getting products to customers. In 2015, they ran out of on-site goods which prompted TRU to try a new inventory algorithm, but ecommerce fulfillment issues were created as they underestimated holiday volume. Since the buyout ten years ago, the company has also been managed by no fewer than four CEOs: