Toys R Us Inc. has filed for bankruptcy reorganization, a victim of the change in retailing and the company's own heavy debt burden, but said it would continue to operate as usual heading into the crucial holiday shopping season.
With its spacious, high-ceiling stores that hold thousands of items, Toys R Us pioneered the big-box format for toy sales and once was the go-to destination for people shopping for toys, baby products and birthday gifts.
But similar to many brick-and-mortar retailers, Toys R Us was overwhelmed by consumers' rapid shift to buying goods on the internet at sites such as Amazon.com and the severe price competition from those sites.
Although Toys R Us has its own website, it failed to keep pace with those of competitors such as Amazon.com Inc., Wal-Mart Stores Inc. and Target Corp.
In addition, Toys R Us is struggling under $5 billion of debt, much of it stemming from 2005 when a trio of investment firms bought the Wayne, N.J., company and took it private.
Toys R Us operates 1,695 stores, including its Babies R Us stores. All told, the company does business in 38 countries and employs 65,000 people worldwide.
With its filing under Chapter 11 of the U.S. bankruptcy laws late Monday, Toys R Us remains open but is protected from creditors' claims while it works out a court-supervised reorganization plan.
Toys R Us did not announce any store closures — "in fact, we will be announcing our seasonal hiring push and expect to hire thousands of employees in the coming months," spokeswoman Jessica Offerjost said in an email Tuesday.
The company's filing came in U.S. Bankruptcy Court for the Eastern District of Virginia in Richmond. Toys R Us said its Canadian unit also intended to seek reorganization in the bankruptcy court in Ontario.
Toys R Us has 259 licensed stores outside of the United States and Canada that it said are not part of the reorganizations.