Toy Stocks Fall On News Of Potential Toys R Us Bankruptcy

Toyland is in trouble.

Hasbro, Inc. HAS, Mattel, Inc. MAT and JAKKS Pacific, Inc. JAKK each plunged about 2 percent Wednesday on news that Toys R Us hired restructuring lawyers to help address about $400 million in debt and potentially file for bankruptcy.

The national retailer faces a 2018 deadline, forcing critical action just ahead of the sales-heavy holiday season. Last year, Mattel posted revenue of $1.8 billion and $1.83 billion in its third and fourth quarters, respectively, against the following quarter’s $736 million. Hasbro saw a similarly large spread across holiday and non-holiday quarters.

The vendors may need to emphasize other distribution channels depending on Toys R Us’s financial decision. Management will issue an update during its second quarter earnings call on Sept. 26.

Consideration will undoubtedly include Toys R Us’s poor 2016 holiday comps and a reported loss of $164 million in this year’s first quarter. Its woes aren't unique and actually echo those of the greater retail industry.

Vornado Realty Trust VNO, which has partial ownership of Toys R Us with Kohlberg Kravis Roberts and Bain Capital Partners, barely moved on the report of potential bankruptcy filings and continues to trade up on the day.

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Image credit: Terence Ong (Own work), via Wikimedia Commons