Bankruptcy possibly on the cards for Toys "R" Us

Toys "R" Us has engaged law firm Kirkland & Ellis to assist in restructuring its debt due in 2018 worth US$400 million, with options including bankruptcy filing and raising financing, according to multiple media reports.

In a statement to Reuters, a spokesperson from Toys "R" Us said the company is "evaluating a range of alternatives" to deal with its 2018 debt maturities, which may include the possibility of getting additional financing. The company also said in a statement to CNBC that it expects to provide an update on the activities and the several ongoing initiatives to offer an "outstanding" customer experience during the holiday season, during its Q2 2017 conference call.

Consolidated net sales for Toys "R" Us in the first quarter of 2017 were US$2,206 million, a US$113 million decrease compared to the same period in 2016. There was a 6.2% decline in domestic business, while international sales dipped by 0.6% due to weaker sales in Europe, and was partially offset by growth in Asia Pacific.

During its first quarter earnings announcement, Dave Brandon, chairman and CEO, Toys“R” Us, said the challenges Toys "R" Us faced during the 2016 holiday season continued into the first quarter.

“Overall weakness in the baby business, as well as slower growth in the toy category and very aggressive price discounting by our competitors were significant contributors to our disappointing results. However, we have several key initiatives which we expect to drive growth during the second half of the year,” Brandon said.

“Among the more noteworthy projects are our new webstore and baby registry, which will be implemented this summer; new capabilities in CRM; an enhanced loyalty program and additional shop-in-shops to drive traffic. We expect this work will have a meaningful difference on the customer experience in both our webstore and bricks and mortar locations," he added.

Earlier this year, Toys "R" Us attempted to get back into the e-commerce game by revamping its website. The revamp was part of a US$100 million investment by the company over the last three years, made to boost its e-commerce experience. Toys "R" Us was trying to make its website standout from the clutter, as it faces stiff competition from Amazon, Target and Walmart.

It also combined its businesses in Southeast Asia, Greater China and Japan, in a bid to make the company "advantageously positioned" to maximise the synergies arising from the integration. In May, Toys "R" Us named Andre Javes as president, Toys“R”Us, Asia Pacific, overseeing all operations and business activities for the company’s growing number of stores in Southeast Asia, Greater China, Japan and Australia.

Marketing has reached out to Toys "R" Us for comment.

Most recently, another traditional toymaker LEGO also found itself in a difficult situation, announcing that it will cut 1,400 jobs globally before the end of 2017. This was in a bid to simplify its business model.