Following the news that Toys R Us has filed for bankruptcy, comes details of the company’s debts – including $32 million owed to the LEGO Group.
Over 100,000 creditors, who supplied Toys R Us with stock expecting to be paid for it, are affected by the retail giant’s bankruptcy filing. In total the toy chain owed $7.5 billion, including $32 million to the LEGO Group. Other toy suppliers are also affected, as reported by the Chicago Tribune:
Toys R Us owes $14.06 million to Jakks, which last year posted a profit of $1.2 million, making the California-based toy supplier one of more than 100,000 creditors sideswiped by the toy chain’s bankruptcy in the run-up to the all-important holiday season. In total, Toys R Us owes $7.5 billion to a group that includes virtually every major toymaker in the country: Mattel (owed $136 million), Hasbro ($59 million), Spin Master ($33 million), Lego ($32 million), Radio Flyer ($12 million), Crayola ($2.6 million).
The LEGO Group gave a brief comment to the newspaper:
A spokesman for Lego, which has been weathering its own financial troubles, said the company is “deeply engaged in ongoing dialogue” with Toys R Us as the companies try to figure out what’s next. Others said they were consulting bankruptcy attorneys and financial advisers to sort out shipments — and payments — related to holiday inventory. VTech, the maker of electronic toys and tablets, says it expects holiday sales to Toys R Us “to decline.” Meanwhile, a handful of smaller companies say they have already severed ties with the world’s largest toy store chain.
The future of Toys R Us largely depends on the goodwill of suppliers, and whether or not they consider the survival of the toy retailer vital to their own future.
Bankruptcy experts said the company’s future will largely depend on whether it can persuade its suppliers to keep shipping their products, particularly ahead of the holiday season, which accounts for about 40 percent of the company’s annual sales.
“If the bankruptcy filing does not allay supplier fears and consumer fears, the holiday shopping season could be disastrous leading to, at a minimum, store closings or possibly a complete liquidation,” said Tom Arnold, a finance professor at the University of Richmond Robins School of Business.
The future of the USA’s longest standing toy retail chain hangs in the balance over this Christmas shopping season, with the outcome unlikely to be clear for several months yet. The impact of Toys R Us failing to survive would be felt throughout the toy industry, and could lead to the future of smaller suppliers being put in doubt.