Tomorrow, Toys R Us will plead with its creditors to approve a corporate voluntary arrangement.
A deal would result in the closure of a least 26 Toys R Us stores and associated redundancies, but, it is argued, provide the giant with a second chance to tell its toy story to UK shoppers.
The question creditors must ask themselves is, should they choose to throw Toys R US a lifeline and take a hit themselves, what confidence can they have that the retailer will not find itself in the same predicament a little further down the line?
When he revealed plans for a CVA at the start of this month, Toys R Us UK managing director Steve Knights maintained that “the warehouse stores we opened in the 1980s and 1990s, while successful in the early days, are too big and expensive to run in the current retail environment” and transformation is needed.
The rise of online shopping and other spending shifts have certainly contributed to Toys R Us’ difficulties, but that’s not the whole story.
Noticeable in the reaction to the retailer’s difficulties – and expressed for instance on social media – was what a dismal customer experience it often seems to provide.
In one Twitter exchange, @TheRetailOp argued: “The loss prevention dept has more power in stores than sales, marketing or customer service put together.”
“Certainly from a customer point of view, the security paraphernalia that you encounter as you enter or exit a Toys R Us shed saps what little magic there is”
@soult on Twitter
To which @soult replied: “Certainly from a customer point of view, the security paraphernalia that you encounter as you enter or exit a Toys R Us shed saps what little magic there is.”
While Toys R Us is ailing, others in the same market are succeeding. Smyths Toys doubled its UK profits in its last reported year, while The Entertainer said at the half-year mark in September that profits were 5% ahead of plan.
Similarly, while Toys R Us’ big sheds may not be delivering the goods, other retailers’ are.
Tesco’s Extra stores – once also written off as outmoded – were growing at 1.6% like-for-like when it last updated. A sign, surely, that warehouse stores can work when there is proper focus on making them appealing.
Only today, the latest study on out-of-town retail from Colliers revealed the lowest vacancy rates in retail parks in almost 20 years. Retail park footfall has been up for seven consecutive months and generally growing since 2013.
So as rivals thrive and the sort of locations from which Toys R Us trades draw shoppers, the retailer perhaps has some fundamental issues to address.
It must show it can address them. Otherwise, approval of a CVA tomorrow will simply represent a stay of execution.