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Toys ‘R’ Us has filed for bankruptcy in the US and Canada, it was announced on Tuesday, after the company racked up $5 billion (£3.7 billion) of debts.
The once ubiquitous toy retailer has increasingly found it difficult to assert itself within the growing online market place and changing consumer patterns.
Whilst sales for the US retailer peaked at $13.9 billion in 2012, sales have continually fallen amid an increasingly challenging retail environment.
Competitors such as Amazon (NASDAQ:AMZN) have continually strengthened in recent years, dominating the toys, books and electronic market.
“The past decade has seen a dramatic change in the domestic toy market with new channels, increased competition, and new technology all having a deleterious impact on the sector and traditional toy stores. Unfortunately, Toys ‘R’ Us has not responded effectively to these challenges,” said Neil Saunders, managing director of GlobalData Retail.
Gary Grant, founder of UK toy shop chain The Entertainer, agreed that the public’s buying habits were adapting.
“We’re seeing it even in the supermarkets, where the big sheds aren’t being visited as frequently as more convenient in-town locations,” he said in comments to the BBC.
“So we’re seeing in grocery the convenience stores are much more successful now than some of the over-spaced units that the grocers have.”
Despite filing for bankruptcy, Toys ‘R’ Us said most of its locations remained in profit, and would continue to operate throughout the holiday season.
Toys ‘R’ Us hopes the move will allow it to effectively restructure its debts, ultimately turning the failing business around.
“Our objective is to work with our debt holders and other creditors to restructure the $5bn of long-term debt on our balance sheet, which will provide us with greater financial flexibility to invest in our business,” commented chief executive Dave Brandon.
Toys ‘R’ Us locations outside the US and Canada in the UK, Australia and Asia are not set to be affected by the bankruptcy filing.