Amidst one of the largest bankruptcies by a specialty retailer, toy-store chain, Toys R Us Inc., would be closing down a fifth of its stores in the US in the coming months.
The company is set to restructure $5 billion of its long-term debt, requiring bankruptcy protection. They filed before the holiday season in 2017 in the United States and Canada. This unfortunately, casts doubts over the future of its nearly 1,600 stores and 64,000 employees.
According to a letter posted on the company’s website, Chief Executive Officer David Brandon stated that its 180 stores in the US will begin closing early in February. It will continue until mid-April when the remaining stores are shut down.
The shutdown will affect toy makers Hasbro and Mattel, two of Toys R Us’s biggest suppliers. In 2016 alone, Mattel sold 11 percent of its total sales to Toys R Us, making the toy chain their second-largest customer.
According to Linda Bolton Weiser, D.A. Davidson analyst, she expects Mattel to experience only 1.5-2 percent estimated sales growth for 2018 because of the store closures. However, this would only occur if toys they’ve shipped to Toys R Us are yet to be picked up by other retailers.
On the other hand, Weiser expects a slightly less impact for Hasbro. Its 2018 estimated sales will be hit by only 1-1.5 percent. Unlike Mattel, the Monopoly board game maker gets about 9 percent of its revenue Toys R Us.
Wall Street analysts meanwhile, foresee a different scenario. To them, Toys R Us closing stores will cause a 3 percent rise for Hasbro, and 1 percent drop in 2018 sales for Mattel.
According to CEO Brandon, gaps in customer experience during the recent holiday season prompted the bankruptcy filing and store closure. In addition, the store suffered after growing competition from online giant Amazon.com and regional independent toy retailers.
Brandon joined the brand as CEO in 2015 after spearheading Domino’s Pizza Inc.’s turnaround. He is expected to do the same for the Wayne, New Jersey-based retail company.