For years, the company dominated toy sales, and its Babies “R” Us chain was a leader in baby products like diapers and strollers. But it has faced intense competition from big box retailers like Walmart and Target that have ramped up toy offerings. The rapid growth of toy sales on Amazon has also cut into Toys “R’ Us’s market share.
While many traditional retailers have struggled to compete with Amazon, the debt load carried by Toys “R” Us has amplified that pressure.
The company has about $5 billion in long-term debt and has been burning through cash, as sales decline.
As of April 29, the company had $301 million in cash or cash equivalents, down from $458 million a year earlier, according to a quarterly securities filing in June. The company said in the filing that it had hired the firm Lazard to help with its refinancing efforts.
But Toys “R” Us warned at the time that “a number of factors including factors beyond our control could reduce or restrict our ability to refinance these debt obligations on favorable terms.”
Already this year, there has been a wave of retail bankruptcies, including the children’s clothing retailer Gymboree, Payless Shoesource and rue21, which sells teen clothing. Other retailers have closed thousands of stores and laid off tens of thousand of workers, as they try to cut costs and compete with e-commerce sites.