The toy retailer filed for Chapter 11 on Monday
We’re not playing.
Toy store chain Toys “R” Us has filed for bankruptcy, amid intense competition from the likes of Walmart and Amazon. It made the Chapter 11 filing late on Monday nite, citing a need to deal with its long-term debt, which has topped $5 billion.
For its part, the company says it will keep its Toys “R” Us and Babies “R” Us stores open and that it would be business “as usual” at the roughly 1,600 stores. And the company CEO, Dave Brandon, kept an upbeat tone about the matter, noting: “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.”
But experts say that the bankruptcy could negatively impact consumers’ shopping. Here are a few things that might change in the coming months.
You may not be able to get your hands on some of the “hot” holiday toys at Toys “R” Us this year, says Chuck Tatelbaum, an attorney at Tripp Scott who has 51 years of experience in bankruptcy law. That’s because the bankruptcy will make the manufacturers of these toys nervous to deal with Toys “R” Us for fear they won’t get paid. So they might demand cash upfront, and Toys “R” Us might not be able to come up with that upfront money, he explains. “If you could sell the toy to Amazon and know you will get paid, or sell it to Toys ‘R’ Us and not know, who are you going to sell the toy to?” he explains.
For its part, Toys “R” Us tells Moneyish that they have “received commitments for over $3.0 billion in new financing that will help enable us to meet our business obligations during the financial restructuring process. With our vendor’s support, we expect to achieve a successful outcome for our company, business partners and other stakeholders this holiday and well into the future.”
Your local Toys “R” Us might close or shrink. While, for now, the toy retailer says it’s business as usual, Tatelbaum notes that the bankruptcy could lead to Toys ‘R’ Us closing some of its lower performing stores. “They’re looking to cut costs so will close stores and reduce store size, which can save on rent and utilities,” says IBISWorld research manager Jonathan DeCarlo. And this, Tatelbaum says, could happen as soon as a month or two, as it did with the Sports Authority bankruptcy. The company tells Moneyish that “it did not announce any stores closures…in fact, we will be announcing our seasonal hiring push and expect to hire thousands of employees in the coming months.”
This is how the Toys ‘R’ Us bankruptcy might ruin your holiday shopping https://t.co/sBWPPbCzTw
— Moneyish (@Moneyish) September 19, 2017
Prices will likely be competitive. While people may hear bankruptcy and think super deals, Tatelbaum says that he thinks, in general, they will price things to compete with other retailers, rather than offering up goods at bargain basement prices. Indeed, DeCarlo, says that Toys “R” Us will likely be trying to compete — especially on things like video games and packaged games and toys — with retailers like Amazon and Walmart.com. And he adds, there will be continued downward pressure on prices at the retailer as it struggles to compete. “We’ve ALWAYS offered a price match guarantee, and we will continue to do so,” Toys “R” Us tells Moneyish.
Don’t panic about returns, gift cards or registries. While there is some teeny risk around gift cards and returns, Tatelbaum says that you will most likely be able to use gift cards going forward and have normal returns. On this front, the big issue is consumers confidence — people are worried they won’t honor gift cards or returns — and thus don’t buy things from the store, further hurting Toys “R” Us, he says. The company reassures consumers on this front, telling Moneyish, “all customer loyalty programs are continuing as normal, including Rewards“R”Us and the Babies“R”Us Registry.
Bottom line: Don’t panic, says Tatelbaum, who thinks that Toys “R” Us will “be okay.” Adds Bankrate.com senior economic analyst Mark Hamrick: “The bankruptcy filing should make very little immediate difference to consumers.”
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