Toys “R” Us Inc. is planning to close about 180 U.S. stores as part of a reorganization plan to emerge from its September bankruptcy, according to a court filing.
The move to shutter about 20 percent of its U.S. store base, which needs court approval, comes four months after the world’s largest toy chain filed for protection from its creditors, a response to years of lackluster results and an unsustainable $5 billion debt load. The closures will begin next month, with Babies “R” Us locations accounting for at least half.
In December, Bloomberg News reported that the retailer would close as many as 200 stores.
Toys “R” Us had a challenging Christmas shopping season in the U.S. and overseas, Chief Executive Officer Dave Brandon wrote in a letter to employees that was obtained by Bloomberg News. While the bankruptcy hurt customer confidence and disrupted other parts of the business, the company has made operational mistakes that need to be fixed, he said.
Brandon’s plan includes revamping a dozen locations to better combine the baby and toy businesses into one co-branded experience, with more such stores coming next year. It will also cut the number of items offered in locations to reduce inventory, according to the memo. That will help simplify the company’s store operations and supply chain.
He also wants to revamp the retailer’s loyalty program and pricing model to be more competitive. At Babies “R” Us, which will see about 40 percent of its locations closed, the focus will shift to promoting its baby-registry business. That operation generates more sales of higher-priced items, such as furniture.
Shutting stores is common for bankrupt retailers, but Toys “R” Us had said that its Chapter 11 filing wouldn’t mark a big retrenchment. Brandon said shortly after the filing that the company was pushing ahead with plans to open smaller stores in some cities. He also vowed to make locations easier to shop and more fun, by adding toy demonstrations and other experiences.
The closings aren’t good news for toymakers. Companies large and small rely on Toys “R” Us to introduce new offerings to consumers. The industry also didn’t have a good holiday season, based on early signs, including tepid demand for Star Wars-themed toys.