Toys ‘R’ Us may file for bankruptcy as early as this week. The toy retailer which has multiple stores around the country has struggled to continue growing its business.
Toys R Us plans to use its bankruptcy filing as a way to reemerge on the cutting edge of the retail world, closing underperforming stores and transforming others into “interactive spaces” to thrill both adult and pint-sized customers.
The big-box retailer did not specify how many of its 1,600 stores it plans to shutter but acknowledged in a court filing Tuesday that “leases are a substantial burden” on its finances. The company also hopes to renegotiate some leases.
Toys R Us plans to invest $277 million from 2018 to 2021 to convert existing locations into side-by-side storefronts dedicated to toys and the company’s Babies R Us brand, according to a court filing. In locations where Toys R Us and Babies R Us have been operating separately, profits were suffering.
“Once these initiatives are implemented, Toys R Us stores will be interactive spaces with rooms to use for parties, live product demonstrations put on by trained employees, and the freedom for employees to remove products from boxes to let kids play with the latest toys,” CEO David Brandon said court papers.
The plan includes the creation of augmented-reality video games that customers can play on their smartphones while shopping at Toys R Us.
In the short term, Toys R Us will need to focus on repairing relationships with suppliers that recently demanded cash-on-delivery for toys after reports surfaced of the company’s potential bankruptcy.
The retailer’s long-term survival amid intense competition from Amazon, discount chains and baby product outlets may be predicated on its ability to overhaul its stores and improve its lagging online experience.
“With any retailer these days there is a risk of liquidation,” said Drew McManigle, a restructuring consultant at SierraConstellation Partners. “The question is really going to become if they can convince their creditor constituencies that they’re viable.”
Here are ways Toys R Us hopes to survive:
The company piled up billions in liabilities after a private equity venture transformed it into a private company more than a decade ago. Those debts have blocked Toys R Us from…