BY Fraser Tennant
In another blow for the beleaguered toy retailer giant, Toys R Us has announced that it is to close 26 stores in the UK as part of a process to transform the business and make it fit to meet the evolving needs of customers in today’s UK retail market.
Under the UK Company Voluntary Arrangement (CVA) process, the toy chain has submitted a comprehensive operational and financial restructuring plan to its creditors and will solicit their approval of this plan over the coming weeks.
If approved, the CVA would substantially reduce the UK company’s rental obligations and allow the company to move to a new, viable business model. The store closures, which may put more than 800 jobs at risk, are expected to commence in Spring 2018.
The toy retailer giant currently employs 3200 people in the UK.
The CVA process will not impact any Toys R Us entities or stakeholders outside the UK, including employees, vendors and customers. The company's approximately 1600 stores around the world, including all stores in the UK, are currently open for business and continuing to operate as usual.
“All of our stores across the UK remain open for business as normal through Christmas and well into the New Year,” said Steve Knights, managing director of Toys R Us UK. “Customers can also continue to shop online and there will be no changes to our returns policies or gift cards across this period.”
During 2018, the plan is for Toys R Us to make changes to the store estate as it moves to a new business model for future growth and profitability.
Mr Knights continued: “Our newer, smaller, more interactive stores are in the right shopping locations and are trading well, while our new website has generated significant growth in online and click-and-collect sales. But the warehouse style stores we opened in the 1980s and 1990s, while successful in the early days, are too big and expensive to run in the current retail environment.”
As a result of a heavy debt load and a consumer switch toward online shopping, in September 2017, Toys R Us voluntarily filed for Chapter 11 bankruptcy protection in the US and Canada.
Dave Brandon, chairman and chief executive of Toys R Us, concluded: “As we continued to work through the financial restructuring process, we hope to receive authorisation to restructure our UK lease obligations so that we will be better able to invest in our UK business.”