Toys “R” Us Canada is turning to the courts in an effort to stay afloat, as years of financial strain, store closures, and legal battles with suppliers and landlords push the iconic toy retailer into creditor protection.
On Tuesday, the company confirmed it has applied for creditor protection in Ontario, a legal move that temporarily shields it from paying creditors while it restructures its operations or explores a potential sale. The decision follows the closure of 53 stores over the past two years and a wave of lawsuits tied to unpaid bills.
In filings submitted to the court, the retailer cited persistent challenges including high inflation, rising labour expenses, ongoing supply chain issues, and the steady migration of shoppers to online platforms. Despite attempts to cut costs by laying off employees, shutting down unprofitable locations, renegotiating supplier contracts, and experimenting with new revenue streams, the company acknowledged those measures were not enough to restore financial stability.
Toys “R” Us Canada disclosed that it owes at least $120 million to vendors, in addition to significant outstanding rent owed to landlords across the country. Several suppliers have launched legal action over alleged unpaid invoices, while multiple landlords have filed claims together worth tens of millions of dollars accusing the company of failing to meet its lease obligations.
Although many of these cases have yet to be tested in court, the retailer admitted it is facing numerous ongoing legal disputes related to contract and lease claims. In instances where it has responded, the company has largely denied wrongdoing or challenged the amounts being sought.
The legal pressure has coincided with a dramatic downsizing of the retailer’s physical presence. Longstanding store locations have been shuttered, some properties have reportedly been listed for sale at nominal prices, and equipment from the company’s Ontario headquarters was auctioned off late last year.
For now, the company says its remaining 22 stores will continue operating during the creditor protection period. However, it cautioned that further reductions are possible. Options under consideration include additional store closures, liquidation of assets, or a broader sale of the business.
A court-appointed monitor has been tasked with overseeing the restructuring process and guiding the company through negotiations with creditors.
Toys “R” Us Canada is owned by a private investment group that acquired the business in 2021, following an earlier restructuring that saved the Canadian operations after the U.S. parent company collapsed. The owner also controls several music, entertainment, and apparel retail chains, and in recent years has experimented with cross-selling merchandise across its brands.
Those efforts have had mixed results. Some ventures have already been shut down, and a related toy company tied to the same family was placed into receivership last year.
As the creditor protection process unfolds, the future of Toys “R” Us Canada remains uncertain whether it emerges as a smaller, restructured retailer or changes hands entirely will depend on the outcome of negotiations in the months ahead.
