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Toys R Us tells workers it will close all U.S. stores, analyst says

As the 70-year-old retailer faces liquidation, Sen. Chuck Schumer warns that consumers holding unredeemed gift cards could be stuck; asks FTC for help.

Terry Mackenzie of Bay Shore stocks her cart

Terry Mackenzie of Bay Shore stocks her cart as shoppers flock to Toys R Us on Thanksgiving evening, Nov. 24, 2016. Photo Credit: Johnny Milano

Toys R Us will sell or close all of its 880 U.S. stores, it told employees Wednesday.

That’s according to a toy industry analyst who spoke to several employees who were on the call with management.

The 70-year-old retailer’s CEO told workers it plans to liquidate all of its U.S. stores, Jim Silver, a toy industry expert, said. Then it could do a deal with its Canadian operation to run some of its U.S. stores, he said.

With 12 Toys R Us and four Babies R Us locations on Long Island, the move could put hundreds of local employees out of work.

Toys R Us did not respond to requests for comment. A Commack store manager declined to comment.

Consumers also might be stuck with useless gift cards if the retailer shuts down, Sen. Chuck Schumer (D-N.Y.) said.

He is asking the Federal Trade Commission to make sure Toys R Us Inc. has not broken any laws as it begins liquidation proceedings.

“With the entire Toys R Us operation at risk of shutting its doors for good, I am urging the company to redeem outstanding gift cards for cash so they are not as worthless and unwanted as a lump of coal in a stocking,” Schumer said in a statement Wednesday.

Schumer wants the FTC to find out how many unredeemed gift cards are held by consumers, he wrote in a letter to Maureen Ohlhausen, acting chairwoman of the FTC.

The FTC does not comment on specific situations, spokesman Frank Dorman said.

Generally speaking, a bankrupt or closed company “might honor its gift cards, or a competitor might,” he said. “Consumers should call the company or its competitor to find out. Also, if a company doesn’t redeem gift cards right away, it might do so later, so consumers should check with the company periodically to find out,” Dorman said.

One consumer expert had a different suggestion for using gift cards from retailers whose futures are questionable.

“First and foremost, get out there and spend them” as quickly as possible, said Jack Gillis, spokesman for the Consumer Federation of America, a nonprofit based in Washington, D.C.

After a business closes, its gift card holders are unsecured creditors, at the very bottom of the list for payouts from the failed company’s assets, he said.

“The value of a Toys R Us gift card is probably going to go through the floor,” Gillis said.

Bankruptcy judges have discretion in allowing companies in bankruptcy proceedings to accept gift cards, but retailers always have encouraged consumers to use gift cards promptly, said J. Craig Shearman, spokesman for the National Retail Federation, a trade group in Washington, D.C.

“Gift cards are meant to be used and enjoyed, not stashed away and forgotten,” he said.

In January, Toys R Us, which filed for Chapter 11 bankruptcy protection last fall, announced plans to close up to 182 stores after a slow holiday sales season. A month later, the retailer said it would likely close another 200 stores.

Four of the closures initially announced were on Long Island, but the Commack store — a combined Toys R Us and Babies R Us location — was among dozens nationwide given a reprieve in February.

with wire reports

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