Suppliers Wary Of Toys R Us Repeat

Toys R Us the store may already be a distant memory for shoppers – but for its suppliers, lessons learned from the retailer’s demise are being carried into their future dealings.

Reports in Retail Dive on Tuesday (Aug. 28) detailed the financial struggles that Toys R Us vendors endured even before the company filed bankruptcy. Vendors reportedly gave the firm hundreds of millions of dollars’ worth of trade credit, giving the retailer more time to pay invoices. When the bankruptcy occurred, those debts were still due.

A settlement reached last month saw Toys R Us paying some of those debts – but according to reports, vendors are expressing their frustrations and are using the experience as a lesson for their future business deals.

Rick Woldenberg, CEO of educational toy firm Learning Resources, told the publication that the demise of Toys R Us and its impact on vendors is “shameful in every way, and very damaging.”

He noted that former Toys R Us vendors are likely to be more reluctant to provide trade credit to bankrupt corporate customers moving forward. According to reports, that decision could accelerate the financial troubles of those customers who rely on trade credit to remain in operation during financially turbulent times.

Vendors who spoke with the publication also noted their disapproval of how Toys R Us managed its bankruptcy. According to reports, JPMorgan provided a loan package worth $3.1 billion in bankruptcy financing for Toys R Us, yet was unable to turn itself around.

Suppliers reportedly were unaware of how dire the company’s financial situation had become.

“Nobody shared it, and even if they shared it, I’m not sure any of us would’ve been sophisticated enough to understand it,” Jay Foreman, CEO of toy company Basic Fun!, told the publication. “Many of us are toy entrepreneurs. This is what we do for a living — we’re not finance majors, we’re not Wall Street guys, we’re not lawyers. However, the guys at Hasbro and Mattel are, or at least they should have a whole bunch of those people employed over there, and they got hustled as badly as anybody else.”