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Toys ' R ' US communicates to its employees in the USA that it liquidates its stores

Closing the chain will leave a huge gap in the business of selling toys

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Toys ' R ' US communicates to its employees in the USA that it liquidates its stores

Toy´s "R" Us throws towel. Drowned in its own debt and without margin to refloat its business, chain of toys communicates to employees that it will sell or close all its stores in United States. The drastic adjustment of last few years was not enough for me to survive. The hole it leaves is huge for toy manufacturers like Hasbro and Mattel, who generate 10% of sales in ir stores.

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The company, founded seven decades ago, has already declared itself in default in September, two months after Christmas shopping. The season went wrong and that forced him to renegotiate terms of loans he had with creditors to be able to stay in business. He's not just a victim of Amazon. Walmart and Target hypermarkets are squeezing ir profit margin by throwing prices down floor.

The CEO of Toy´s "R" Us, David Brandon, made fatal announcement to employees at company's headquarters in Wayne, NJ, before delivering settlement plan to judge who oversees bankruptcy. "I always thought brand and business could survive in America," he said, while saying that toy manufacturers and customers who left company will eventually miss it. "They will regret what happened," he inaugurated.

There are 33,000 jobs at risk. To operate physical stores like those of Toy´s "R" Us, huge and dedicated exclusively to sale of toys, it is very expensive and to survive companies must be well capitalized besides having scale. For toy manufacturers, chain was a great showcase to present ir most popular items. Now y lose a great customer.

The chain has already left parquet in 2005 to have more leeway with which to face adjustment of its business model. Bankruptcy had to bring more financial flexibility. But to be able to survive, I had to give clients reasons to enter ir stores. An almost impossible challenge, because consumer habits changed for e-commerce and children were less interested in toys.

Toy´s "R" Us is controlled by KKR and Bain Capital funds since 2005, toger with real estate company Vornado. They bought it for 6.6 billion, 000 dollars. Creditors consider that traffic in ir premises and profit margin of business is not sustainable, that is why y pressure to proceed to liquidation. A month ago, he was authorized to close 180 stores in United States.

The company n explained that measure was necessary to make Toy´s "R" Us more viable and competitive. The network operated more than 800 locales in country when it was declared in default. He had a debt of 5 billion. The solution that was left to avoid bankruptcy was to find a buyer or reach a last minute deal with creditors that would allow him to continue operating.

The moment liquidation arrives is not best for toy store. Mattel recorded a 12% drop in sales during quarter that coincided with Christmas purchases. They also dropped Hasbros, even though it controls rights to make Disney movie toys. Walmart and Target do not serve to compensate, because y also have problems selling toys. Toy´s "R" has just announced that it liquidates its stores in UK.

It is largest liquidation of a commercial chain in U.S. since bankruptcy of Sports Authority just two years ago, which led to closure of 460 locals and left nearly 15,000 people unemployed. It's a hemorrhage that never ceases. Last week we also announced suspension of payments from Claire stores, anor of usual names in big malls. In your case you will sell stores to Giant supermarkets and CVS drugstores.

The British subsidiary of Toys ' R ' Us, which was declared in default last February, will also close all its stores over next six weeks as it has not been possible to secure its sale. The decision will leave more than 3,000 people out of work.

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