Update (September 19, 2017, 9:50 a.m.): Toys 'R' Us filed for bankruptcy last night, issuing a statement announcing its decision. "Today marks the dawn of a new era at Toys 'R' Us, where we expect that the financial constraints that have held us back will be addressed in a lasting and effective way," Dave Brandon, chairman and CEO, said in the statement. "As the holiday season ramps up, our physical and web stores are open for business, and our team members around the world look forward to continuing to put huge smiles on children's faces."
This story was originally published on September 18, 2017, at 6:20 p.m.
Toys 'R' Us could file for bankruptcy as soon as this week, according to sources who spoke to CNBC. But you can relax, sort of: This doesn't necessarily mean that your favorite toy store is going away.
In fact, it's very likely that the chain is planning to file for Chapter 11 in order to restructure a massive $400-million debt that's due in 2018, which is a fairly common tactic. "This filing is really a buildup of financial problems over the past 15 years," Jim Silver, an industry analyst and editor of TTPM.com, a toy-review site, told Bloomberg. "Finally, the straw broke the camel's back."
Addressing the debt head-on helps assure Toys 'R' Us' biggest suppliers — like Hasbro and Mattel — that the company plans to keep on truckin'. Some vendors have reportedly already cut back on shipments. Earlier this month, Toys 'R' Us hired restructuring lawyers from Kirkland & Ellis to help deal with the debt.
Sales fell flat for Toys 'R' Us during the 2016 holiday season, and it's safe to say that Amazon played a big role in this. The online retailer is the "beneficiary of [the] millennial parent" and "quickly becoming the number-two toy retailer behind Walmart," Jefferies analyst Stephanie Wissink told CNBC.
There's been quite a bit of Twitter outrage about the whole thing.
So there you have it. Millennials have apparently killed the toy store, too.
P.S. Word to the wise: Consumerist recommends using up your Toys 'R' Us gift cards ASAP, since a Chapter 11 filing often voids a company's existing gift cards.
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