Toys ‘R’ Us Files for Bankruptcy

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Category: Business

Listening

Unlocking Word Meanings

Read the following words/expressions found in today’s article.

  1. compensate / ˈkɒm pənˌseɪt / (v) – to give payment
    Example:

    I quit my job because it does not compensate me properly for my work.


  2. cut ties with (someone) / kʌt taɪs wɪθ / (idiom) – to end a partnership or a relationship
    Example:

    We cut ties with the company because the manager was rude.


  3. brick-and-mortar / ˈbrɪk ənˈmɔr tər / (adj) – referring to a traditional business that operates in a physical store
    Example:

    We used to own a brick-and-mortar store before we shifted to an online store.


  4. underway / ˈʌn dərˈweɪ / (adj) – in progress or currently happening
    Example:

    The meeting about the new project is underway.


  5. get back on (one’s) feet / gɛt bæk ɒn fit / (idiom) – to become successful again
    Example:

    The company got back on its feet after its newest product became a hit.


Article

Read the text below.

Toy company Toys ‘R’ Us filed for Chapter 11 bankruptcy last September.


According to reports, the company’s bankruptcy is due to billions worth of debt, in addition to tough competition against retailers such as Walmart and Amazon.


With a Chapter 11 filing, a company struggling financially is allowed to reorganize its management and business structure. It can also negotiate with its creditors about debt payments. Right now, Toys ‘R’ Us is requesting a $325-million special financing to pay big toy suppliers like Mattel and Hasbro.


However, while Toys ‘R’ Us can pay its big suppliers in full, smaller suppliers might not be compensated. In fact, its supplier for toys like fidget spinners and squishies does not expect payment for its recent toy delivery. As such, the supplier decided to cut ties with the company, which could mean fewer toy choices in Toys ‘R’ Us’ brick-and-mortar stores. The timing of the loss poses risks to the company’s profits, especially since a huge percentage of their revenue comes from Christmas sales.


Nonetheless, the company plans to recover through “Project Sunrise,” an initiative to improve shopping experience by strengthening the company’s online stores. However, there is no word if the initiative will be underway this Christmas.


While currently struggling, Toys ‘R’ Us may still have a chance to get back on its feet. In the past, many companies that filed for Chapter 11 bankruptcy were able to recover. For instance, fashion brand Betsey Johnson LLC recovered after adjusting its products from high-end clothes to mid-priced clothes. Automotive company General Motors also recovered through government funding and a reorganization plan.


Viewpoint Discussion

Enjoy a discussion with your tutor.

Discussion A

• Aside from Project Sunrise, what else should Toys ‘R’ Us do to get back on their feet? Discuss.
• What other companies or industries recently seem at risk of losses and should step up their game?

Discussion B

• Instead of immediately filing for bankruptcy, what can struggling companies do to prevent a full-blown financial crisis? Discuss.
• How can companies support employees who may be laid off due to bankruptcy filing? Discuss.