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Bankruptcy rumours hit Toys ‘R’ Us

21 September 2017 - 10:40 by Simon Crisp

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Kids entertainment retailer Toys ‘R’ Us looks to be in a tight spot after sources quoted by Reuters and other outlets claimed that it could file for bankruptcy before the end of the year.

The firm is reportedly having a tough time managing its £3.6 billion in debt and is struggling to keep up with repayments because lenders are already taking action due to the likelihood of bankruptcy being declared.

So far there has been no official statement from the company, which has hundreds of stores across the UK and also offers safe shopping online via its website. However, insiders believe that it could admit defeat in the next few months ahead of the busy Christmas shopping period; a time when most retailers seek to generate a hefty portion of their annual revenues.

In this case, the bankruptcy is a self-perpetuating problem for Toys ‘R’ Us, as its mounting debts and growing repayments are snowballing as the prospect of further hardship looms. It is thought that it could file for bankruptcy protection in the US, although how this would impact its British operations remains to be seen.

In all likelihood it will survive at least for the time being, albeit under new management and with a different plan of action to allow it to repay its loans. This could well lead to store closures, but will presumably not impact its ability to provide safe shopping online to customers in the UK and in the other markets where it operates.

A number of high street firms which have disappeared in the past decade since the credit crunch have ended up carving out a new niche for themselves as online-only outlets. Toys ‘R’ Us could be the next to join them, although its international reach may protect it from exiting the bricks and mortar market altogether.