Toys R Us sales woes may have been sign of what was to come

The toys outlet, which runs around 1,600 stores, filed for Chapter 11 bankruptcy protection this month.

Toys 'R' Us files for bankruptcyWochit

Toys R Us, trying to reorganise under bankruptcy leading into the holiday season, was seeing overall sales fall and those at established locations drop even more sharply as it was heading for a Chapter 11 filing.

Weaker sales illustrated the difficulty the retailer was having amid more intense competition from businesses such as Amazon and Walmart that can offer lower prices. Toys R Us was already hamstrung by $5bn (£3.71bn) in debt.

The toy retailer that also owns the Babies R Us chain says that for the three months ended 29 July, sales fell to $1.46bn from $1.56bn. Even more telling was its same-store sales, considered a key indicator of a retailer's health. That figure tumbled 6.4% in the quarter.

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A year earlier, those sales edged up 0.5%. Toys R Us said the same-store sales decline was due to softness in the US and Canadian markets. Domestically, same-store sales fell 6.8% from a year earlier, and in Canada they declined 3.3%.

Weaker sales illustrated the difficulty the retailer was having amid more intense competition from businesses such as Amazon and Walmart that can offer lower prices.

Toys R Us, which runs around 1,600 stores, filed for Chapter 11 bankruptcy protection this month as it heads into the all-important holiday season, which makes up around 70% of annual toy sales. Toys R Us has said that it has received $3.1bn in new financing that will allow it to pay its employees and suppliers through the period.

Aside from its sales woes, the Wayne, New Jersey, US-headquartered company has struggled with debt since private-equity firms Bain Capital, KKR & Co. and Vornado Realty Trust took it private in a $6.6bn leveraged buyout in 2005.

The plan had been to take the company public, but that never happened because of its weak financial performance. And the debt meant Toys R Us couldn't invest in its business.

Toys R Us, which runs around 1,600 stores, filed for Chapter 11 bankruptcy protection this month.Reuters

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