Who Killed Toys R Us? The Internet Has Some Ideas

Retail toy store chain Toys R Us Inc. filed for bankruptcy Monday night. The Wayne, New Jersey-based company, which has $5 billion in debt, said its nearly 1,600 Toys R Us and Babies R Us stores will not be affected.

Toys R Us had hired a law firm that specializes in bankruptcy earlier this month — a move that unnerved suppliers who began demanding cash in advance for orders.

The decision to file for Chapter 11 bankruptcy protection set off “a dangerous game of dominoes,” said the company’s chief executive, David Brandon, in court filings, according to Reuters.

The company then had to scramble to put together $1 billion for its vendors. Bankruptcy protection will allow them to continue to borrow more money to manage daily operations and acquiring stock.

“Together with our investors, our objective is to work with our debtholders and other creditors to restructure the $5 billion of long-term debt on our balance sheet,” said Brandon in court filings.

The upcoming holiday season typically accounts for 40 percent of Toys R Us’ annual net sales. The only company that sells more toys that Toys R Us in the U.S. is Amazon.

In May 2009, Toy R Us acquired the famed FAO Schwartz brand, but the company would shutter the store that year, and ultimately sold it to ThreeSixty Group, Inc. in October 2016.

Nostalgic Twitter users had no qualms about blaming the online retailer for killing Toys R Us, though the company plans on operating stores as usual.

Several brick-and-mortar brands have struggled to compete with online retailers and big-box stores like Walmart.

Several other large retail chains have filed for bankruptcy this year including Perfumania Inc, clothing chains rue21 Inc., Gymboree Corp. and shoe store chain Payless Holdings LLC. Some retailers like Macy’s and Sears have reverted to closing large amounts of stores.

Some Twitter users lamented the possible loss of a childhood staple.

Neil Saunders, managing director of GlobalData Retail, told the Washington Post Monday that another reason for the chain's struggles has to do with children's tastes shifting from toys to electronics.

"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."

Toys R Us was acquired in 2005 by private equity firms Kohlberg Kravis Roberts and Bain Capital, along with real estate firm Vornado Realty Trust.