The iconic retailer Toys ‘R’ Us filed for bankruptcy last year and has announced that it will close 800 of its stores in the United States. Customers finding lower prices shopping online or at other big-box retailers have hurt sales during the past several years as the company has struggled with $8 billion in debt.
The news affects about 33,000 employees, but the company’s financial problems could also hurt other businesses that fill the shelves of Toys ‘R’ Us with their products. Some of the country’s largest toymakers — such as MGA Entertainment, which includes brands such as Little Tikes and the popular L.O.L. Surprise! – supply products to the chain. Some have d whether Toys ‘R’ Us had stopped paying its suppliers after filing for bankruptcy.
Now, the company has asked the U.S. Bankruptcy Court for approval to stop paying vendors while attempting to find a buyer for the international portion of the business. The debt owed to MGA Entertainment alone is more than $21 million.
What Can Vendors Do If A Company They Supply Is In Financial Trouble?
Losing the profits from sales to what was once the country’s top toy retailer will no doubt hurt vendors and suppliers, putting their own businesses and employees at risk. These companies are examining their legal options, including the purchase of the portion of the business that Toys ‘R’ Us is not liquidating.
What can suppliers and vendors to do protect themselves in a similar situation? Businesses that supply companies facing bankruptcy should hire an experienced attorney to protect their rights.