Toys R Us expected to close one in four UK stores

News has emerged that Toys R Us is expected to close a quarter of its UK stores as the toy retail landscape is reshaped.

Toy World, an industry magazine with a keen awareness of what is going on in the toy trade, reports the news first put out by Sky. The store closure plans will see 25 Toys R Us stores disappear, with hundreds of jobs expected to go alongside the outlets. An indicator of the trouble that the UK arm of the US brand is in landed in customers’ inboxes when the entire Star Wars range (excluding LEGO) was discounted by 50% ahead of the new film release.

Here is the news from Toy World:

The board of Toys R Us’s UK subsidiary is expected to announce as soon as Monday that it is proposing to launch a process called a company voluntary arrangement (CVA). A CVA is a mechanism enabling companies to organise their funding and operations while enjoying protection from their creditors.

The move, which will require the approval of a 75% majority of the company’s creditors, would leave roughly 25 of the company’s 105 British shops facing closure, according to insiders. However, the affected Toys R Us shops are expected to remain trading throughout the Christmas period and well into the new year.

Toys R Us employs roughly 3200 people in the UK, so a decision to close a quarter of its stores would affect at least several hundred jobs. It is thought that larger out-of-town stores would be disproportionately affected by the closure plan, owing to their weak performance.

The disappointing performance that suggests out of town stores will be closing shows how much the way that toys are purchased has changed since the proliferation of Toy R Us stores in the 1980s and 1990s. Back then, big box out of town retail was the way of the future, whereas in recent years Toys R Us has opened up small stores in shopping centres. Coupled with the arrival of Smyths in the UK a few years back, and Toys R Us has looked rather out of date for some time.

Further information about the state of Toys R Us in the USA has also piqued the interest of Toy World’s editor in his weekly blog, where he identifies the many who are profiting from the company’s decline:

My comments about the TRU CEO’s bonus payments in last week’s Blog certainly seemed to strike a chord, judging by the huge number of emails and comments I received. It is clearly a contentious subject. Without wishing to pour oil on troubled waters, I found out a few other interesting things this week; for instance, did you know that Toys R Us specifically chose to file for bankruptcy in Richmond Virginia because of ‘favourable’ jurisdictional conditions, which include making it easier to walk away from union contracts and- wait for it – allowing its lawyers to be paid at a higher rate. The New York law firm representing TRU is charging a whopping $1745 an hour – apparently 25% higher than the going rate in retail bankruptcies. It’s not just the lawyers which stand to gain either; bankers and other professionals who helped to arrange the $3.1bn loan to keep the company operating in the short term stand to collect a cool $96m in fees. Do you see a pattern emerging here? You may say that it doesn’t matter, providing TRU is kept afloat, but tell that to US creditors, who are expected to receive settlements of around 25 cents to the dollar on what they were owed before bankruptcy protection was filed. They are the ones who are ultimately paying for these parasitical organisations.

Although for the past decade Toys R Us has only been a pale imitation of what it was in its heyday, for those who grew up visiting the retailer it will be disappointing to see it continue to decline.