Playtime’s over: Online retailer Toys R Us collapses again amid efforts to launch recapitalisation rescue

Toys R Us has collapsed into administration amid desperate recaptialisation efforts to right the beleaguered retailer.

Luke Andrews and Duncan Clubb of BDO Business Restructuring were called in on Thursday — just a few months after the shock resignation of Toys R Us’ chief executive Penny Cox and a warning from the company’s auditor that it risked running out of money over a near $13 million gap between what it owed and the value of its assets.

The business had a market capitalisation of just $4.1m before it went under.

“As previously announced to the market, the company has been pursuing a recapitalisation plan with the support of its primary stakeholders,” it said in a statement to the Australian Securities Exchange.

“However, the company is no longer in a position to pursue a solvent recapitalisation plan.

“In light of these events, the board has determined that the company is, or is likely to become, insolvent and that the appointment of an administrator is in the best interests of the company.”

A quarterly financial report released last week showed Toys R Us had just $211,000 in cash and cash equivalents at the end of March, down from $579,000 at the end of the previous quarter.

Toys R Us filed for bankruptcy in 2018 and closed 44 Australia stores with the loss of about 700 staff.

It re-launched as an online-only retailer in late 2019 after reaching a deal with Hobby Warehouse. In 2021, it was bought by ASX-listed retailer Funtastic, which changed its name to Toys R Us the same year.

But it has struggled to return to its glory days and has found it increasingly difficult to lure shoppers away from bigger rivals like Kmart and online platforms Amazon, Shein and Temu

An update to the market last Friday said its primary debt holder had been supporting the business with short-term cash requirements and working with the board while it firmed up a recapitalisation plan.

It also reported revenues of $863,000 in the three months to the end of April — slightly up from the $779,000 a year earlier — with a substantially higher product margin of 39 per cent.

Toys R Us said it would continue to operate as usual “where possible” as administrators dive into its financial affairs and explore options for a restructure or sale.

“The primary stakeholders have indicated that they will work with the Administrators on any restructuring proposal that may be put to creditors,” it said.