As part of its reorganization under bankruptcy protection (see “Toys ‘R’ Us Files Chapter 11”), Toys ‘R’ Us is likely to close a substantial number of lower-performing stores, but estimates of the number of closures are widely variable, from around 100 to as many as 550 of the company’s 879 U.S. stores. 

Estimates from sources “with knowledge of the situation” ranged from 100 to 200 stores on the block to be closed, according to a report by Bloomberg, which also carried the company’s response that, “Any speculation on that figure is premature and likely to be inaccurate.”

Estimates from UBS analyst Arpine Kocharyan were more pessimistic, according to a report by Benzinga.  Kocharyan’s “base case” scenario would involve the closure of 21% of the company’s stores, or around 180 locations.  Her “bear case” scenario would see the chain closing 40 to 50% of its stores; and her “worst case” scenario would involve the closure of 63%, or over 550 stores.

UBS analysts noted the proximity of competition, even from Toys ‘R’ Us own stores, according to CBS News, with 183 stores within 15 minutes of at least one other Toys ‘R’ Us store.  And there’s plenty of competition from mass merchant stores, with 90% of Toys ‘R’ Us stores within 15 minutes of a Walmart or Target store.  That’s a lot of pressure, and the fact that the company can get out of its leases under bankruptcy protection makes the time right for a substantial cut in store count.

The company was forced to declare bankruptcy last fall when its suppliers began restricting shipments of new product after a report that the chain was considering bankruptcy (see “Toys ‘R’ Us Was on Hold for 40% of Supply at Time of Bankruptcy Filing”).  Holiday sales are tracking about 15% behind last year’s according to the Bloomberg report.