Toys R Us is seeking bankruptcy court approval to shut down its hundreds of remaining stores in the U.S. and Puerto Rico following dismal sales during the crucial holiday shopping season.
Among the 735 stores the iconic chain is seeking to close are 31 in Illinois, encompassing nearly 1.3 million square feet of retail space, along with a distribution center in Joliet.
Toys R Us has not yet announced a timeline for the liquidation, but bankruptcy court filings indicate sales could begin immediately and will end by July 31. Closing sales already have begun at 144 stores _ including six in the Chicago area _ that Toys R Us earlier this year decided to shut down. The chain will honor gift cards and other rewards dollars for the next 30 days.
Toys R Us said it notified its roughly 33,000 U.S. employees Wednesday of plans to shut down stores.
The Wayne, N.J.-based retailer is still exploring options for selling its stronger Canadian business, including a plan that would save up to 200 top-performing U.S. stores as part of that deal.
News of the shutdown came about six months after Toys R Us sought Chapter 11 bankruptcy protection. At the time, the struggling retailer sounded optimistic about a turnaround, and it secured a loan of more than $3 billion to keep business going during restructuring.
But U.S. sales over the holidays were "well below worst case projections," Toys R Us said in a bankruptcy court filing. The bankruptcy took a toll on the confidence shoppers and vendors had in the chain, which also said it had trouble matching competitors' prices.
"I am very disappointed with the result, but we no longer have the financial support to continue ... U.S. operations," Toys R Us Chairman and CEO Dave Brandon said Wednesday in a news release.
He called it a "profoundly sad day for us as well as the millions of kids and families who we have served over the past 70 years."
"It does feel like a bit of Americana is being lost, the idea of this emporium of toys, a place that fulfills the physical manifestation of a child's imagination," said Stephanie Wissink, managing director and consumer products analyst at Jeffries.
The company got its start in 1948, when founder Charles Lazarus opened baby furniture store Children's Bargain Town in Washington, D.C., amid the postwar baby boom. He eventually added toys to encourage parents to keep coming back before opening his first toys-only shop _ Toys R Us, with the backwards "R" logo to mimic a child's writing.
Unlike most other bankrupt retailers that ended up liquidating stores, it remained a force to be reckoned with in the U.S. toy industry, with roughly 15 to 20 percent market share, Wissink estimated. When it filed for bankruptcy in September, Toys R Us said the "vast majority" of its 1,600 Toys R Us and Babies R Us stores worldwide were profitable.
But Toys R Us was saddled with sizable debts, much of which stemmed from 2005, when three private investment firms took the company private. That limited its ability to invest and compete with rivals like Walmart, Amazon and Target that were "running on all cylinders," Moody's lead retail analyst Charlie O'Shea said in an emailed statement.
Like other traditional bricks-and-mortar retailers, it struggled to adapt to big changes in consumers' shopping habits, including a switch from specialty big-box chains to one-stop stop mass merchants and online retailers.
Toys R Us was too slow to embrace e-commerce and invest in the in-store experience, said Tim Barrett, senior retailing analyst at Euromonitor International.
"Spread thin across too many countries, with too many stores and too much debt, it boxed itself into its current fate," he said.
