Toys ‘R’ Us Australia Collapses

April Davis By April Davis | 22 May 2018

Following the fall of its American and UK counterparts, Toys ‘R’ Us Australia has fallen into voluntary administration after the global toy retailer failed to find a buyer for its Australian operations.

The future of 44 toy stores across the country and more than 700 jobs have been put on the line, as Toys ‘R’ Us announced Monday night it had appointed voluntary administrator, McGrathNicol Advisory after a bidder who was in talks to purchase the Australian stores fell through.

Toys ‘R’ Us’ subsidiary, Babies ‘R’ Us has also entered administration.

Representatives from McGrathNicol Advisory have said it will “urgently explore options for completing a sale of the stand-alone Australian business as a going concern, or a recapitalisation through the voluntary administration process”.

According to McGrathNicol, Toys ‘R’ Us will be honouring gift vouchers, but only if customers spend the equivalent value of the voucher in store. This means that if a customer wants to redeem a $100 voucher, they will have to spend an additional $100 in order to redeem it.

Online orders will also be fulfilled, but only if the stock is available and the order has been paid for in full. Administrators are also confident that employees will be paid their benefits, however, this could be subject to change.

The collapse of the Australian branch of Toys ‘R’ Us comes after the US chain filed for bankruptcy protection in March this year, announcing the closure of 735 American stores. The company says heavy discounting from online marketplaces like Amazon, and discount department stores like Kmart are responsible for its financial woes.

Toys ‘R’ Us Australia is the latest in a long string of child-focused retailers that have gone bust in recent years, with Baby Bounce and Baby Savings also closing down. Further to these retailers, ASX-listed retailer, Baby Bunting, has been feeling the pressure as it struggles to compete with the liquidation sales of its competitors.

In its latest quarterly update, Baby Bunting flagged a full-year profit downgrade of 10 to 20 percent, as comparable store sales fell into the negatives by 2.5 percent within the first six weeks of quarter four. The company cited price competition as the main reason for this decline.

Australia’s toughening retail market has also claimed big-name retailers, Pumpkin Patch, Payless Shoes, and Herringbone, which like Toys ‘R’ Us, couldn’t keep up with the high cost of rent, weak household spending, and relentless discounting pressure.

Toys ‘R’ Us heads in the US are also holding an auction to sell off its intellectual property, with the Geoffrey the Giraffe logo and Babies ‘R’ Us trademark all up for grabs.

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