Toys ‘R’ Us has announced plans to close at least 26 stores across the UK, a move that is believed could put up to 800 jobs at risk.
In a statement on Monday, the company said that it plans to revamp its business in response to “evolving needs of customers in today’s UK retail market”.
It said that it would be instigating a so-called “Company Voluntary Arrangement” under which it will seek creditor approval to shut outlets in order to save costs.
There will be no disruption for customers shopping through the upcoming Christmas and New Year period, Toys ‘R’ Us added.
In September, Toys ‘R’ Us filed for bankruptcy protection in the US, in what experts at the time described as one of the largest ever Chapter 11 filings by a speciality retailer. Its UK unit has also been battling tough market conditions and waning sales for some time.
“Like many UK retailers in today’s market environment, we need to transform our business so that we have a platform that can better meet customers’ evolving needs,” Steve Knights, managing director of Toys’R’Us in the UK, said.
He said that the decision to propose this CVA was a “difficult one” but that it was deemed “the best path forward to make essential changes to the business”.
Andy Brian, head of retail at law firm Gordons, said that developments at Toys ‘R’ Us are further evidence of the problems triggered by consumers increasingly favouring the convenience of online shopping.
“Like other retailers that have failed recently, Toys ‘R’ Us has not adapted quickly enough to face the challenge of rivals such as Argos and Amazon operating through digital platforms,” he said.
Mr Knights said that many of Toys ‘R’ Us’ small stores were performing well, and the company’s online performance was robust too. But the bigger, warehouse-style outlets, opened in the 1980s and 1990s, are now “ too big and expensive to run in the current retail environment”.
“The business has been loss-making in recent years and so we need to take strong and decisive action to accelerate the transformation,” he said.
The group said that it had submitted a comprehensive restructuring plan to its creditors and would now seek their approval to implement the plan over the next 17 days.
If the plan is put into action, at least 26 stores will be shuttered, with closures commencing in the spring of next year.
Toys ‘R’ Us currently employs around 3,200 people across the UK. It said that redundancies would be necessary despite all efforts to redeploy team members where possible.
“We recognise this process will affect many of our team members and their families, so we are committed to keeping all of our staff informed throughout this process. Our teams will continue to play a key role in turning our business around,” Mr Knights said.
Alvarez & Marsal has been appointed as restructuring advisor and law firm Kirkland & Ellis LLP has been named principal legal counsel to Toys ‘R’ Us.