Millions of dollars due in payments to the suppliers are at risk as the iconic toy maker speeds toward US liquidation. The retailer's difficult financial position has also put more than 3000 jobs at risk in the UK.
When Toys 'R' Us secured a $3.1 billion bankruptcy loan in September, toy makers were reassured they would be paid for goods delivered to the company.
Now those payments are at risk in a dramatic turn of events as the iconic toy retailer speeds toward US liquidation.
The retailers difficult financial position has also put more than 3,000 jobs at risk in the UK.
Even more TOYS, Bikes, Outdoor Toys and Baby Gear with bigger reductions in the Toys R Us CLOSING DOWN SALE this weekend!! pic.twitter.com/SJiA39DUh9— Toys 'R' Us UK (@toysrusuk) March 17, 2018
Millions due in payment
"We have a $14-$15 million payment due that hasn't been paid," Isaac Larian, chief executive of Bratz dolls maker MGA Entertainment, said.
"If I was a guessing man, I wouldn't think I'd get all of it back."
MGA, whose LOL Surprise! toys were the industry's top seller last year, stopped supplying goods to Toys 'R' Us on Wednesday, Larian said.
Toys 'R' Us accounted for 15 percent of MGA's annual sales. Larian spent Thursday and Friday on the phone with his lawyers and tending to a bid he and other vendors have made to acquire Toys 'R' Us' Canadian operations.
“I have been working from 4 am till midnight every day on this talking to other toy company executives, lawyers, bankers, other retailers," Larian said. "I’m exhausted.”
At a Thursday hearing at US Bankruptcy Court in Richmond, Virginia, vendor lawyers said they were receiving hourly calls from clients about hundreds of millions of dollars of claims.
Whether or not they receive payment will depend on the outcome of the liquidation proceedings.
For some, the writing for Toys 'R' Us had been on the wall. Marc Wagman, who heads insurance broker Gallagher's US trade credit and political risk business, said credit insurers stopped covering Toys 'R' Us in the first and second quarters of 2017.
"Unfortunately, for a lot of these toy companies, Toys 'R' Us represented a means of testing consumer taste, a big retail opportunity and, for some, accounted for 20-40 percent of revenue. How that's going to be replaced remains to be seen," Wagman said.
Toys 'R' Us was the last major specialty toy retailer, a loss not only for small, innovative toy makers that relied on it as a showcase, but also for brands such as Walt Disney Co that rolled out products with partner labels for blockbuster films like "Frozen" and some of the "Star Wars" series.
In a dire landscape that claimed 17 retail bankruptcies and more than 8,000 US store closures last year alone, vendors are wising up on their customers' financial health, paying close attention to online sales, new sources of revenue and, especially, liquidity.
In the UK, the administrator of Toys R Us UK said last month it was making every effort to secure a buyer, but added that while its stores would stay open for now, it was undecided whether some or all of its shops would eventually close.
The toy retailer has struggled in Britain in recent years as shoppers increasingly prefer to spend online rather than visit its large out-of-town stores.