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Toys R Us demise to have impact from toy makers to landlords

Anne D'Innocenzio, AP Retail Writer | 3/15/2018, 6:54 a.m.
The demise of Toys R Us will have a ripple effect on everything from toy makers to consumers to landlords.
A person walks near the entrance to a Toys R Us store, in Wayne, N.J. Toys R Us's management has told its employees that it will sell or close all of its U.S. stores. (AP Photo/Julio Cortez, File)

NEW YORK — The demise of Toys R Us will have a ripple effect on everything from toy makers to consumers to landlords.

The 70-year-old retailer is headed toward shuttering its U.S. operations, jeopardizing the jobs of some 30,000 employees while spelling the end for a chain known to generations of children and parents for its sprawling stores and Geoffrey the giraffe mascot.

The closing of the company's 740 U.S. stores over the coming months will finalize the downfall of the chain that succumbed to heavy debt and relentless trends that undercut its business, from online shopping to mobile games.

And it will force toy makers and landlords who depended on the chain to scramble for alternatives.

CEO David Brandon told employees Wednesday the company's plan is to liquidate all of its U.S. stores, according to an audio recording of the meeting obtained by The Associated Press.

Brandon said Toys R Us will try to bundle its Canadian business, with about 200 stores, and find a buyer. The company's U.S. online store would still be running for the next couple of weeks in case there's a buyer for it.

It's likely to also liquidate its businesses in Australia, France, Poland, Portugal and Spain, according to the recording. It's already shuttering its business in the United Kingdom. That would leave it with stores in Canada, central Europe and Asia, where it could find buyers for those assets.

Toys R Us Asia Ltd. has more than 400 retail outlets in Brunei, China, Hong Kong, Japan, Macau, Malaysia, Philippines, Singapore, Taiwan and Thailand. It is a Hong Kong-based joint venture with the Fung Group, which owns a 15 percent stake. It also controls Asian sourcing giant Li & Fung, a major supplier to Western retailers like Wal-Mart.

A Fung spokesperson did not immediately reply to a request for comment.

When Toys R Us initially announced it was filling for bankruptcy protection last year, the Asian venture said it was not affected and operated as a separate legal entity independent of other Toys R Us businesses around the world.

In Hong Kong, where Toys R Us has 15 stores, parents said there were few other choices in a retail market dominated by a few big players.

"If you want something like a mainstream toy shop, then Toys R Us is the only place you can go," said Ching-yng Choi, whose home and office are both within walking distance of Toys R Us shops.

"Basically either it's Toys R Us or you go to specialized and very expensive toy shops that sell, for example, wooden toys that come from very far away countries like in Europe," she said.

Toys R Us had about 60,000 full-time and part-time employees worldwide last year.

Brandon said on the recording that the company would be filing liquidation papers and there would be a bankruptcy court hearing Thursday.

"We worked as hard and as long as we could to turn over every rock," Brandon told employees.

When the chain filed for Chapter 11 bankruptcy protection last fall, saddled with $5 billion in debt that hurt its attempts to compete as shoppers moved to Amazon and huge chains like Walmart, it pledged to stay open.