Bankruptcy may not spell the end for Toys R Us stores – at least outside of the U.S. The embattled retailer’s stores will get a second chance at retail life in Canada and Europe.
Toys R Us agreed to sell its Canadian business, which consists of 82 stores, to Fairfax Financial Holdings Limited for around $234 million dollars in a bankruptcy court hearing on Tuesday (April 24). Those stores might retain the Toys R Us name.
In three European countries, however, the stores will be rebranded to fall under the Smyths Toys banner. The Irish retailer agreed to purchase 93 of the retailer’s stores – as well as its eCommerce websites – in Austria, Germany and Switzerland. The company’s co-founder, Tony Smyth, is optimistic about the opportunity that the Toys R Us deal presents.
“We are convinced about the future of multichannel specialist toy retail and are confident that we can successfully introduce and grow our brand in continental Europe,” Smyth said, according to Chain Store Age.
Smyths could use the acquisition to grow its brand across Europe. With the deal, the company becomes among the largest toy retailers on the continent with about 200 brick-and-mortar stores. That number would include the Toys R Us stores – along with more than 80 U.K. stores that the company opened in the past 10 years.
As a result of Smyths’ expansion in Britain, the retailer didn’t opt to buy Toys R Us stores in the U.K. Those stores would have overlapped with Smyths’ existing stores across the pond. In all, finding a buyer for the U.K. stores has been an arduous task for Toys R Us. Reuters had previously reported that Toys R Us planned to shutter its remaining brick-and-mortar locations in the U.K. as the retailer was not able to find a buyer for their business there.
But, in Canada, Fairfax Financial Holdings President Paul Rivett has big plans for Toys R Us stores: He wants to bring them "into the modern retail era.” Rivett sees the stores as places where parents can enjoy a cup of joe while their kids play with toys. And it’s not Fairfax’s first retail deal. The company – through a consortium – bought Performance Sports Inc. last year. That acquisition was overseen by a bankruptcy court, too.
The Toys R Us Saga
The news comes days after lawyers and advisers for Toys R Us – who were reportedly looking at bids for the retailer’s business in Canada at the time – turned down a last-minute bid for the retailer’s U.S. stores from toy-company founder Isaac Larian because his offer didn’t meet the threshold set by the court. In addition to an offer of $675 million for the Toys R Us stores in the U.S., Larian had bid $215 million for the retailer’s operations in Canada.
Bids aside, vendors for Toys R Us are facing a potentially harsh reality. To pay vendors for merchandise shipped after its bankruptcy filing in September, a lawyer for Toys R Us said the embattled retailer will create a $156 million fund. But lawyers representing the retailer’s vendors said that amount doesn’t cover the $760 million in trade claims, CNBC reported.
“It’s a really hard pill to swallow,” said Erika Morabito, a lawyer for a group of trade vendors, at a U.S. Bankruptcy Court hearing on Tuesday (April 24). She said that despite employee layoffs and store closures, vendors are in a “dire” situation. If vendors don’t receive a larger settlement, Morabito said the group and other vendors may seek litigation “against the persons or entities responsible for the severe losses suffered.”
Blockbuster Lives On
The Toys R Us brand may live on – even past bankruptcy. Blockbuster, for example, went bankrupt in 2010, but its name lives on in a few locations. Currently, six Blockbusters are open in Alaska and another two are open in Oregon. But they may not be open forever: The last Blockbuster location in Texas closed earlier this year.
Will the Toys R Us name live on in the U.S. too, or will America’s iconic toy brand become another chapter in retail history? Only time will tell.