Retail

Toys ‘R’ Us Australia collapses into voluntary administration

Eloise Keating /

Toys "R" Us

Toys "R" Us. Source: iStock.

The Australian operations of toy retailer Toys ‘R’ Us have been placed into voluntary administration, two months after the decision was made to close hundreds of stores in the US and UK. 

Toys ‘R’ Us operates 44 stores across Australia, which will all continue to trade throughout the voluntary administration process.

Administrators Jason Preston, Keith Crawford and Barry Kogan from McGrathNicol were appointed to the Australian Toys ‘R’ Us operations, which also includes Babies ‘R’ Us stores, on Monday.

In a statement, they said they will now “urgently” explore whether the business can be sold as a going concern or if it can be recapitalised.

In addition to the retail stores, the business also operates a distribution centre at Regents Park in Sydney. The business employs approximately 700 permanent employees, all of which are expected to retain their jobs for the time being.

However, the administrators said in a statement that Toys ‘R’ Us stores will no longer be offering refunds on sold items or redeeming gift cards online.

Customers will be able to redeem gift cards in stores, however, to do so they will be required to spend double the amount of the voucher value. This means in order to redeem a $100 gift card, customers will be required to spend another $100 in store.

Online orders and lay-by purchases will be fulfilled if they have been paid in full and stock is available. The stores will also continue to offer VIP discounts, but shoppers will no longer be able to accumulate and use points earned under the VIP program.

The administrators said the directors of the business decided to place the business in voluntary administration after the final bidder that was participating in a sale process withdrew from the process.

They said their appointment also follows the “insolvency and restructuring proceedings by Toys ‘R’ Us in other jurisdictions around the world”.

The US arm of Toys ‘R’ Us filed for chapter 11 bankruptcy protection back in September 2017, and in March this year, the global toy brand announced it would close or sell all of its stores in the US and the UK. At the time, Toys ‘R’ Us was operating 800 stores across the US and 100 stores in the UK.

In April, reports emerged that there had been “a dozen preliminary offers” received for the 400 Toys ‘R’ Us stores operating in Australia and across Asia, which had been trading as separate entities to the US head office.

Toys ‘R’ Us and Babies ‘R’ Us stores have been trading in Australia since 1993, however, the losses at the retail chain have been growing over the past two years.

According to financial reports seen by The Australian, the Australian operations of Toys ‘R’ Us booked revenue of $276 million in the financial year to January, but recorded a loss of $7.7 million.

In the previous financial year, the company recorded a $9 million loss, and as of the end of January, its accumulated losses in Australia totalled $463.5 million.

NOW READ: First retail collapse of 2018 prompts expert warnings of more fashion pain to come

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Eloise Keating

Eloise Keating is the editor of SmartCompany. Previously, Eloise was news editor at Books+Publishing, the trade press for the Australian book industry.

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