A Toys "R" Us store in Montreal in 2017. The toy retailer says it now owes at least $120-million to vendors and substantial amounts to landlords.Paul Chiasson/The Canadian Press
After closing 53 stores in the past two years and now facing a succession of lawsuits from unpaid suppliers and landlords, Toys “R” Us Canada has turned to an Ontario court for reprieve as it tries to chart a new future.
The toy retailer announced Tuesday that it has filed for creditor protection while it embarks on a restructuring that could see its footprint further diminished or the whole business sold to new owners.
Creditor protection temporarily shields an insolvent company from having to pay those it owes money to while it figures out its next steps.
In court documents, Toys “R” Us Canada said the step was necessary because the company has struggled to cope with inflation, rising labour costs, supply chain disruptions and a shift toward e-commerce.
Landlord sues Toys “R” Us Canada over claim of unpaid rent at Toronto location
It laid off staff, closed unprofitable stores, negotiated with suppliers and explored other revenue streams to try to cope with the headwinds in 2023 and 2024 but the moves weren’t enough to stabilize the business.
Toys “R” Us Canada says it now owes at least $160-million to unsecured creditors – a term used to describe firms that are owed money but can’t seize property or assets to recoup their costs.
About $120.9-million of that sum is owed to vendors and landlords also have “substantial” amounts outstanding from the retailer, Toys “R” Us Canada said in its Tuesday filing.
The Canadian Press previously revealed the company is being sued over alleged unpaid invoices by at least six suppliers, including Spin Master Ltd., the maker of Paw Patrol and Gabby’s Dollhouse toys.
It is also facing at least eight lawsuits collectively valued at about $35-million from landlords like RioCan Holdings and Calloway Real Estate Investment Trust, which have terminated Toys “R” Us Canada’s leases and accused the company of not paying rent.
The claims have not been tested in court but Toys “R” Us Canada said in its Tuesday court filing that it has “various ongoing litigation matters” related to claims for breach of contract or breach of lease.
In many of the cases, Toys “R” Us Canada has not filed a statement of defence. Where it has responded, the company has largely denied the allegations of its suppliers and landlords and taken issue with the amount of money being demanded.
The lawsuits came as Toys “R” Us Canada significantly reduced its footprint, closing stores it had operated for decades. Some of its properties have been put up for sale for as little as $1 and trailers, forklifts and other equipment from its Concord, Ont., headquarters were auctioned off just before Christmas.
While its 22 current stores remain open during the creditor protection period, the company said it will stop accepting gift cards 14 days from now and warned it may reduce the number of locations it operates further.
Liquidating stores, furniture and equipment and developing a sales process for the remaining locations are also options, said Alvarez & Marsal, a third-party monitor set to guide the company through creditor protection, in its own court filing.
Toys “R” Us Canada has about 654 employees across Canada and is owned by a numbered company that does business as Putman Investments.
Ancaster, Ont-.based Putman Investments bought the business in 2021 from Fairfax Financial Holdings Ltd.
Fairfax rescued the company and Babies “R” Us Canada in 2018, when it filed for creditor protection after the American arm of Toys “R” Us sought bankruptcy protection.
Putman also owns entertainment chains HMV, Sunrise Records and FYE as well as apparel retailers Ricki’s, Cleo and Northern Reflections.
In recent years, he opened HMV departments in Toys “R” Us stores and started selling Ricki’s, Cleo and Northern Reflections merchandise in the toy store.
Over the holidays, Putman closed all of its T. Kettle stores it once ran out of former DavidsTea locations and before that, shuttered a short-lived home goods venture called Rooms + Spaces that aimed to take the place of Bed Bath & Beyond Canada.
Putman’s sister company Everest Toys, started by the father of Putman Investments leader Doug Putman, was forced into receivership last year by TD Bank, which is owed $25-million.