The problems for Toys R Us are going overseas, too. The UK branch is now up for sale and looking for a new owner, local media report. The Toys R Us stores in other European countries seem to also be part of the deal.
Sky News reports that the entire European operations of Toys R Us are up for sales. The priority is the UK business which covers hundreds of stores and about 3200 workers. There are also 236 stores outside the UK in 10 European countries. Among them are Austria, France, Germany, Spain. A source said the full list of European countries where Toys R Us’s operations were on the market also included Denmark, Finland, Iceland, Norway, Poland and Portugal.
Both the UK and European businesses are sold in separate processes. Prospective bidders have already given their offers. This development is a bit surprising as it was generally thought the UK business of Toys R Us was saved a few weeks ago.
Sources of Sky News said the UK faced the more imminent threat of bankruptcy. There’s a cash call due later this month meaning administration is inevitable without new funds being injected into the business. That would leave a brand which has had a presence in the UK since 1985 potentially disappearing from the retail sector.
The prospects of a solvent sale were unclear on Wednesday, with some potential buyers likely to wait until Toys R Us UK has crashed into administration before trying to pick off the most attractive stores.
One of the main issues are the poor Christmas trading. It has left the British business facing cashflow issues, and one insider said it looked “close to unsaveable”. Toys R Us UK is already planning to shed up to 800 jobs through a process called a company voluntary arrangement (CVA). It was approved by creditors just three days before Christmas.
The CVA is intended to provide breathing space for Toys R Us UK to improve its fortunes by closing 26 of its loss-making stores and securing big rent reductions at many others. Under that plan, which won the backing of 98% of creditors, including the Pension Protection Fund (PPF), its loss-making larger stores are due to begin closing in the spring.
In the US, Toys R Us won a court order this week to allow it to retain liquidators to close nearly 200 of its shops. The times for Toys R Us seem to be going from bad to worse. Hopefully the company will be able to get through it and survive. It has said it hope to be in the clear by the holiday shopping season this year, but that seems unlikely now given the new setbacks.