Is Toys ‘R’ Us Staging a Comeback?

Following in the footsteps of its American and UK counterparts, Toys ‘R’ Us fell into voluntary administration in May this year. After failing to find a buyer for its Australian operations, the company’s local online store went offline, followed by the closure of its 44 toys and baby goods stores across the country.

But, it seems the company might be staging a last-ditch effort to revive the embattled brand. The Wall Street Journal believes the cancellation of an upcoming auction to sell Toys ‘R’ Us’ brand and rights could offer the retailer a glimmer of hope.

In fact, court documents that have reportedly been cited by the Journal claim a new retail operating business could still be salvaged.

The retailer’s attorney says that instead of selling its brand property and other intellectual property at auctions, the assets will remain part of Geoffrey Holdings subsidiary. This means that Toys ‘R’ Us’ lenders will retain control of the retailer’s IP once the bankruptcy proceedings are finalised, which will likely give lenders a better chance of recovering their finances.

According to the filings, the reorganisation plan “contemplates a new, operating Toys R Us and Babies R Us branding company that maintains existing global license agreements and can invest in and create new, domestic, retail operating businesses under the Toys R Us and Babies R Us names, as well as expand its international presence and further develop its private brands business.”

While the filings make no specific mention to what the retained intellectual property rights will mean for the business’s Australian operations, spectators believe a US resurrection will likely lead to new local operations down under as well.

Toys ‘R’ Us wouldn’t be the first global business to ‘resurrect’ after bankruptcy, as other international brands have maintained an Australian presence despite financial woes in the past. Angus and Robertson is a prime example of this, after the brand retained an online presence in the Australian e-commerce sphere long after its physical footprint was all but obliterated from the local market.

Back in 2011, administrators announced the closure of 42 Australian Angus and Robertson stores, after its owners, REDgroup Retail went into administration. At the time, the group cited “intense competition from online booksellers amid difficult retail conditions” as the reason for its bankruptcy. Since then, the bookstore has remained an active part of the online retail industry.

If Toys ‘R’ Us’ lenders were to save the toy retailer’s brand and re-enter the global retail market, a similar approach could prove fruitful. The rising cost of retail rents and increased competition from discount retailers like Kmart have all played a role in Toys ‘R’ Us’ local woes, notwithstanding the financial issues trickling down from the US. By converting to an online presence, the company could have an opportunity to put its strong local reputation to use in Australia’s fast-growing e-commerce market.

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