Meanwhile, the toy market itself is undergoing severe turbulence as children are increasingly trading in their teddies, Scalextric and dolls for iPads and other electronic devices. Online toy sales have more than doubled to 13.7pc in the last five years, and most of that shift has been from traditional toy retailers to generalist retailers, like the supermarkets which have been battling to win customers by slashing toy prices in the run up to Christmas and Black Friday.Īs business shifts online, it has made Toys R Us’s vast estate of 1,600 aircraft-hanger sized shops less profitable as footfall and store sales have dwindled.

Like most traditional retailers, Toys R Us has been whipped by the rise of online shopping and the rampant growth of Amazon, which has been stealing a slug of sales. Put another way, had it not had to cough up to service its debt, the company would have been making a profit of around $500m.Īs a result, the company which gave birth to the so-called “category killer” model of retail has been crushed from pressures on all sides as its sectoral dominance has been brushed aside. By comparison, earlier this year the company reported sales of $11.5bn, $5m in losses but its debt pile had soared to $4.7bn, which was costing it around $500m-a-year to service.

But it has become clear that Toys R Us could no longer afford its soaring interest payments.Īt the time of the private equity deal in 2005, Toys R Us was making $11.3bn in sales, earnings losses of $696m and carried $1.8bn in debt. It has taken almost 12 years for the full damage of the $7.5bn leveraged buyout by KKR, Bain and Vornando to be felt. The painful hangover of a boom-time debt-fuelled takeover has left it struggling without the financial firepower it desperately needs to survive the increasing pressures of 21st century retailing.

Toys R Us has filed for bankruptcy protection in the US after drowning under $5bn (£3.7bn) of debt.

But that once “magical place” has become a modern day retail calamity. For the past five decades Toys R Us – aided by loveable mascot Geoffrey the Giraffe – has been enticing children into its stores with the promise of “millions of toys all under one roof”.

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