The retail giant Toys R’ Us just filed for bankruptcy this week in both the US and Canada. Toys R’ Us, like many other retailers has struggled to with online retailers such as Amazon. The shopping habits of people around the world are changing, more and more we see a push towards online retailers. This past year online sales accounted for 13.7 % of all retail sales, up from 6.5% five years ago. Now with this bankruptcy filing, Toys R’ Us is looking to restructure to prepare for the upcoming holiday season, during which they sale the most. With nearly 1,600 stores and 64,000 employees, Toys R’ Us wants to use the $2bn loan approved by the bankruptcy judge to stabilize and make the company viable in the long-term.
The most immediate problem for the toy retail chain is the large amount of debt they hold. Toys R’ Us is now working with its debt holders and creditors to restructure the $5bn of long-term debt on their balance sheet. However, it is not all bad news. Toys R’ Us is now planning to expand its online store to better compete with online retailers. Stores run by branches in Europe, Asia, and Australia were not part of this bankruptcy deal. Like Toys R’ Us, other traditional retailers have struggled with the emerging move towards online shopping. Sears and Macy’s have both seen a drop in sales over the past couple of years.
This is yet another example of companies stagnating. Innovation and change is key for a company to stay relevant and profitable in the long-term. With emerging technologies changing the way we do business, companies have to be prepared to change with the times to stay in business.