Small Toy Vendors Could Go Under Thanks To Toys ‘R’ Us

With Toys ‘R’ Us shuttering all of its U.S. stores as part of its bankruptcy, small vendors could follow suit as the Toys ‘R’ Us and Babies ‘R’ Us locations disappear.

Citing interviews with more than a dozen executives, specialists and lawyers, Reuters reported that experts believe many small vendors will go under, as payments owed to many suppliers are now at risk.

As Toys ‘R’ Us continues to seek a buyer for its Canadian, Europe and Asia businesses, the company wants to keep those shelves stocked and customers coming into those stores. However, the same strategy is not being applied to its U.S. stores.

“We have a $14-$15 million payment due that hasn’t been paid,” Isaac Larian, chief executive of Bratz dolls maker MGA Entertainment, told Reuters. “If I was a guessing man, I wouldn’t think I’d get all of it back.” MGA, which makes the popular L.O.L Surprise! toys, told Reuters that it stopped supplying products to Toys ‘R’ Us last week, and that the retailer accounted for 15 percent of its annual sales.

Larian is part of a group aiming to bid for the Canadian operations. “I have been working from 4 a.m. till midnight every day on this, talking to other toy company executives, lawyers, bankers, other retailers,” he said. “I’m exhausted.”

Meanwhile, Reuters reported that last week, vendors’ lawyers have been receiving calls from clients hourly, inquiring about whether they will get paid for hundreds of millions of dollars in claims. The answer depends on the outcome of the liquidation, noted Reuters.

Joseph Shamie, president of Delta Children, one of the biggest suppliers of Toys ‘R’ Us children’s furniture, told Reuters he has short-term concerns about the loss of one of his best partners and the business that partnership brought. “I’m losing a lot of business and in [a] very quick, unmanaged amount of time,” he told Reuters, noting that his company will continue to supply the Toys ‘R’ Us stores outside the U.S. “I have to create opportunity so I can continue to employ the people I employ.”

With retailers closing in droves, the toy vendors are now paying close attention to the financial health of their partners and are eyeing online sales as a new way to boost revenue. Toy retailers that could gain market share as a result of the Toys ‘R’ Us closings include Walmart, Target, JCPenney, Kohl’s and Bed Bath & Beyond, reported Reuters. CVS, Rite Aid and Dollar General are also expected to benefit.

“We’ll work really hard with folks like Walmart and Target to see if they can take up volume by year-end,” said Jay Foreman, chief executive of Basic Fun!. Foreman noted he is also working with Amazon, which will become the second or third largest account in 2018, up from ninth in 2015.