What Will Happen To Toys ‘R’ Us Canada?

**UPDATE** A Califonia-based toy company, MGA Entertainment INC submitted a bid for the Canadian operations of Toys ‘R’ Us Inc.

With no buyer or agreement with creditors, a Bloomberg report suggested that Toys ‘R’ Us in the U.S. is liquidating its 880 stores. A U.S. shutdown seems likely, but with 82 stores plus an e-commerce site, what will happen to the Canadian subsidiary of the store chain?

The Canadian operation remains profitable with $1.08 billion in annual revenue, even though its parent company filed for Chapter 11 last September. According to Lou Brzezinski, the lawyer who represents Toys “R” Us Canada, it’s still possible for the Canadian unit to be spun off, sold and transferred. Some Canadian units of U.S. retailers have survived their parent company’s bankruptcy, such as The Source, which thrived on its own.

According to Toys ‘R’ Us Canada’s vice-president for marketing on Thursday, Clint Gaudry, the company continues to honour all of its customer policies and programs such as its baby registry, gift cards and loyalty points, and business in Canada is operating as usual.

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As far as the Canadian company’s survival, it’s possible, but it would depend on finding a buyer not worried about the future of store-based retailing, who is willing to improve the stores and the e-commerce site. “I could see a private equity firm going in for this,” said George Minakakis, principal at Toronto-based consulting firm Inception Retail Group Inc. “I always wondered why this toy store has to look like a warehouse, versus an environment where it looks like a kid could have fun?”

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However, on the negative side, Toys ‘R” Us Canada would have no U.S. business supporting them, and marketing and merchandising costs could skyrocket. Even with its strong balance sheet, buyers of retail businesses are warier than ever before about investing in a brick and mortar business.“The Toys “R” Us bankruptcy, changing nature of retail, the underperformance of movie toys, and the new light-speed at which kids’ tastes change has created the highest level of trepidation and uncertainty we have seen in years, perhaps since the onset of the Great Recession.”

While Toys“R” Us Canada faces an uncertain future, the company said on Friday that it had no information or comment on the reports about its U.S. parent.

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Do you think Toys R Us Will Survive in Canada? Let us know in the comments.

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