Toys R Us, the iconic retailer that was the go-to for generations of parents and kids, may head to court as soon as Wednesday with a plan to liquidate, according to people familiar with the matter.
The company on Tuesday was drafting the paperwork necessary to file for Chapter 11 liquidation, said people familiar with the matter but not authorized to speak publicly.
While a sale of the company is possible with such a filing, it is unlikely. Instead it will probably shutter its remaining stores, sources said.
Toys R Us had struggled with slipping sales, shifting toy trends and fierce competition from retailers like Walmart, Target and Amazon who often offered many of the same items at a lower price.
But it might have been the nearly $5 billion in debt it shouldered that was the company's undoing.
Debt payments eroded its profits, and limited the amount of resources that Toys R Us had to invest in updating its stores and website.
Toys R Us filed for Chapter 11 bankruptcy protection in September, and hoped the company could restructure, emerging as a more streamlined company with a more manageable debt load.
Holiday sales were far worse than expected, likely dashing the retailer's hopes of avoiding selling the chain, or shutting down.