Toys ‘R’ Us came to popularity in the 1980s as one of the first “category killers,” or stores that sought to dominate a particular category of business. The store performed considerably well over its first two decades of operation. However, with serious competition coming from the online shopping sector, Toys ‘R’ Us has been in financial trouble over the past few years.
Executives for Toys ‘R’ Us supposedly, according to someone inside the deal, agreed to sell or close a whopping 885 stores across the United States of America. In other words, Toys ‘R’ Us is slated to close its businesses in America completely. More than 33,000 jobs are at stake if the toy retailing giant actually does go through with closure, and comes in response to a massive failure taken by the company of being unable to find new structuring for billions of dollars’ worth of debt.
In business, large entities often take on considerable debt. Unlike in personal finance, when debt suggests that people are in dire financial straits, most successful organizations hold debt. It serves as a way to have cash to work with, without having to sell assets or take money from important investment opportunities. The interest charged on such deals is negligible, since the amount of money being borrowed is so large, allowing both lenders and businesses to make money from such arrangements.
Whenever businesses reach levels of debt that they can’t really handle, they attempt to restructure their debt. Just like a building, during an addition of an extra room, might tear away part of its structure to bring on more rooms or additional space, businesses restructure debt by getting other organizations or private investors to assume ownership of such debt in exchange for certain assets, which usually take the form of shares of stock in the indebted company.
Sometimes, businesses are able to turn their performance around. However, not every instance of debt restructuring turns out very well, as seen in the recent announcement that detailed almost-certain closure of retailing giant Toys ‘R’ Us.
In recent months, Toys ‘R’ Us had already strived to close the worst 20 percent of locations across the United States, hoping to regain traction in today’s digitally-dominated consumer shopping space. However, without being able to reasonably pay any of its five-billion-dollar mountain of debt, it was forced to close up shop. No representatives from Toys ‘R’ Us have commented on recent news stories. However, news that the giant will close are true.