Toys “R” Us Inc., which filed for bankruptcy in September, is considering closing at least 100 U.S. stores in the face of weak holiday sales, according to people with knowledge of the situation.
U.S. sales have declined about 15 percent this Christmas-shopping season from a year earlier, according to people recently briefed on the matter, who asked not to be identified because the information isn’t public. The number of closed stores could reach approximately 200, one of the people said, but no decision has been made.
“Final decisions about our real estate portfolio will be done only after careful consideration about the best interests of our business,” said spokeswoman Amy von Walter. “Any speculation on that figure is premature and likely to be inaccurate.”
The Wayne, New Jersey-based company operated 879 U.S. stores as of the end of January, according to its last annual report.
The prospect of Toys “R” Us closing locations deals another potential blow to its biggest suppliers, Mattel Inc. and Hasbro Inc. Shares of both companies fell to session lows on Monday. Mattel declined as much as 4.5 percent to $14.78, while Hasbro dropped 3.2 percent to $91.02.
The toymakers have already blamed Toys “R” Us’s bankruptcy for hurting results. Mattel, the maker of Barbie and Fisher-Price, has been particularly hard hit, with sales plunging in North America last quarter.
Difficult Choices
Shutting stores is common practice for bankrupt retailers, but Toys “R” Us has said that its Chapter 11 filing wouldn’t herald a big retrenchment for the largest toy-store chain. Chief Executive Officer Dave Brandon said in September that the company was pushing ahead with plans to open more stores in some cities. And it was contemplating extending the lease on its Times Square location, which opened in August as a temporary holiday shop.
But with sales continuing to tumble, Toys “R” Us may have tough choices ahead. The bankruptcy process makes it easier to exit leases and shut down the company’s worst-performing locations. And the company has said that it would continue to evaluate its store fleet as part of the restructuring process.
Weak holiday results threaten to complicate the retailer’s plans to get its finances in order and emerge from bankruptcy with an improved balance sheet. Before filing for bankruptcy, the company had been weighed down by roughly $5 billion in debt, stemming from a leveraged buyout last decade led by Bain Capital.
Toys “R” Us previously announced plans to close at least 26 stores in the U.K., which is outside the purview of the bankruptcy. The idea there is to reduce its emphasis on warehouse-size stores, letting the company focus on better-performing small shops and online operations.
