Kennedy: Some Capital Region Toys R Us stores could be in peril

Analysts at investment bank have estimated that nearly 200 locations could close
The Toys R Us in Clifton Park on Black Friday 2017.
The Toys R Us in Clifton Park on Black Friday 2017.

On the day after Christmas, the parking lot looked less than half-full at the combination Toys R Us/Babies R Us store on Wolf Road in Colonie.

That was surprising, given the usual post-holiday bustle that sees retailers slash prices to wring out additional sales and get rid of remaining inventory. Even the Toys R Us blog that morning declared that “the holidays may be over, but deals on the hottest toys are not,” promising up to 70 percent off clearance items.

But then again, the original big-box toy seller has struggled of late, choosing to file a Chapter 11 bankruptcy petition in September aimed at restructuring $5 billion in long-term debt from a leveraged buyout a decade ago.

While Toys R Us no longer is publicly traded, its debt is, and that means the retailer still files financial reports with regulators. The latest one, from the fiscal third quarter that ended in October, showed net sales were lower than a year earlier and the loss from operations grew significantly.

CEO David Brandon called the results disappointing, but said the bankruptcy filing, which occurred mid-quarter, was a “critical first step” in efforts to “reinvent our business.”

Founded nearly 70 years ago as a baby furniture store to serve the post-war baby boom, Toys R Us took its “toy supermarket” form and name in the mid-1950s. It added kids’ clothing with Kids R Us in the 1980s (exiting the concept in 2003), and baby furniture, clothing, gear and commodities with Babies R Us in the 1990s.

The company operates more than 1,600 locations in the U.S. and internationally, the bulk of them as Toys R Us stores.

That number, though, could change with the Chapter 11 filing, which makes it easier to break leases.

Bloomberg reported that as many as 200 sites could be closed during the reorganization, but the company tried to discount that speculation last week in a conference call with analysts on the third-quarter results.

“It’s pure conjecture at this point as to what we’re going to do and when we’re going to do it,” CEO Brandon stated, according to a Thomson Reuters transcript of the call.

Analysts at investment bank UBS also have estimated that nearly 200 stores — a fifth of the company’s U.S. holdings — could close, based on their location within a 15-minute drive of another Toys R Us or Babies R Us site.

Such a scenario might affect the Colonie, Latham and Clifton Park Toys R Us and Babies R Us stores, which are roughly within a 15-minute radius. Farther north, a Toys R Us operates near Aviation Mall in Queensbury.

Brandon suggested on the conference call that breaking any leases still would be complicated.

Filings made in connection with the bankruptcy show that the company is looking to exit Chapter 11 before the 2018 holiday season.

Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at [email protected].

Categories: Business, News, Schenectady County


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