UK Toys R Us Business Likely to Enter Administration

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Toys R Us Logo TRU

Toys R Us in the UK is likely to enter administration in the next few days.

Moorfields has been put on standby as potential administrators, the toy shop chain could be in administration as soon as Monday or Tuesday.

Customers that still have unspent gift cards, vouchers or credit notes should try and use them up this weekend to avoid possibly losing the balances on these payment methods.

If you are worried about the effect of Toys R Us going into administration on any form of gift voucher or credit you may possess, spend it promptly and on goods sold in their stores that you can take away immediately (not home delivery, mail or internet orders).

Toys R Us’s financial troubles have been widely publicised, the retailer’s latest problem is that it is unable to settle a VAT return that is due. The total owed to HMRC is thought to be £15 million, without receiving the capital to pay this bill Toys R Us will have no choice but to enter administration.

25 Toys R Us stores in the UK are currently conducting closing-down sales. The UK business entered into a company voluntary company arrangement (CVA) just a few days before Christmas proposing that a restructuring of the business was necessary to return it to profitability.

Since then, the company has also been seeking a buyer to take over the firm that has traded in the UK since 1985. Hilco has been cited a potential buyer by Sky News, Hilco is a turnaround specialist which in recent years saved music retailer HMV from disappearing from British high streets.

Reports also suggested that The Entertainer, a successful high street toy shop chain, were also in the bidding, however, its owners stated to trade magazine Toy World that this was not the case. When companies are up for sale it is not unusual for rivals to at least take the opportunity to look at the books whether or not they any real intentions on bidding for the business.

In September 2017, the US parent company and its Canadian subsidiary entered into bankruptcy protection in an attempt to restructure the business and return it to profitability.

Recent reports have suggested that the owners of Toys R Us – which is a consortium of Bain Capital, KKR and Vornado Realty Trust – now consider liquidation of the almost seventy-year-old retailer as a preferred option.

Bain Capital, one of the current joint owners of Toys R Us, was the previous owner of KB Toys. Under Bain Capital ownership, this toy store chain entered chapter 11 bankruptcy protection and eventually went completely out of business. Toys R Us acquired the KB Toys trademark and applied it to a range of own-brand toys.

In the USA, roughly 150 Babies R Us and Toys R Us stores are conducting closing-down sales and a further 200 locations could be added soon according to unconfirmed press reports.

Toys R Us is also looking for a buyer of its retail operations in continental Europe.