As the US toy retailer was gearing up for the Christmas rush, Toys R Us found itself having to go into Chapter 11 bankruptcy protection proceedings. Damaged by what it called “a dangerous game of dominoes”, it said the problem arose with a CNBC report which leaked that the company was preliminarily considering Chapter 11. Immediately, almost half the company’s suppliers wanted cash upfront or refused to ship toys.
The possibility of having to go into Chapter 11 then became a dead certainty. Between them, just two toy suppliers – Mattel and Hasbro – were owed some $200m, according to court filings. Mattel’s third-quarter revenues fell by around 20%, with half the decline attributable to the problems at Toys R Us. The retailer’s operations outside of the US and Canada were not involved in the bankruptcy process.
But as Sujeet Indap recently commented in the Financial Times, “Retailers and suppliers would be wise to make a New Year’s resolution to stabilise their system of supply chain finance. It could ensure both their survivals.”