Toys R Us filed for bankruptcy earlier this week, a wicked head-shot to a retail sector that’s been reeling for months.
The TRU filing ranks as the second-largest US retail bankruptcy ever, according to S&P Global Market Intelligence.
Toys R Us had $6.6 billion in assets at the time of filing. Only Kmart was bigger. It had $16.3 billion in assets when it went bankrupt in 2002. Crushing debt pulled the giant toy seller under. According to a Bloomberg report, the company has piled up more than $5 billion in debt. Toys R Us reportedly pays more than $400 million a year on debt service alone.
The company says it plans to continue operating and secured a$3.1 billion operating loan to stabilize operations.
Investors knew retailers were struggling, but it wasn’t until this week’s financial reports that they were able to gauge how much sales had deteriorated due to slowing foot traffic.”
And they have deteriorated significantly. Dillard’s, Macy’s, Kohl’s, Nordstrom and JC Penny all reported dismal first quarter results. On his most recent podcast, Peter Schiff called it the “retailpocalypse.”
The retail sector is in worse shape today than it was in 2008 during and immediately following the financial crisis.”