By Alan Murray and Geoffrey Smith
September 19, 2017

Good morning.

Disruption among retailers claimed its largest victim yet yesterday, with Toys ‘R’ Us filing for bankruptcy protection. The company said it received a commitment for over $3 billion in debtor-in-possession financing that will support its operations during the court-supervised process. Operations outside the U.S. and Canada are not part of the filing.

The Toys ‘R’ Us bankruptcy is just the latest and largest of a string of bankruptcies that have hit the retail sector this year, including well-known companies like Gymboree, Payless Shoes, Gordmans Stores, Radio Shack, The Limited and Gander Mountain. The filings show that online shopping, and the steady advance of Amazon, is taking its toll.

In an interview with Fortune’s Susie Gharib last year, Toys ‘R’ Us CEO David Brandon said of Amazon: “We don’t live in fear of those guys. We know who we are, and what we are good at.” He argued that physical stores actually help digital sales. “The two work hand in glove. The customer likes the safety net of having a store down the road that they can go interact with, take things back, try things out. They may want to order online, but they think that local store is a safety net.”

But in the end, it wasn’t enough of a safety net. The company had a huge debt burden from being taken private in a buyout in 2005.

Expect more retail bankruptcies to come (can Sears be far behind?) News below.

Alan Murray



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