Toys R Us prepares to shut 25 stores

Around 25 Toys R Us stores could close if its new debt deal with creditors is approved

Toys R Us is preparing to close around a quarter of its 106 UK stores, with the loss of hundreds of jobs, the BBC understands.

The closures would form part of a deal to renegotiate debts owed by the company to its landlords - which must be agreed by 75% of its creditors.

The toy giant, which has around 3,000 workers, is looking to move away from its "big-box" out-of-town store model.

Christmas trading and gift cards are not expected to be affected.

The company is seeking approval from its board and US parent company to enter talks with the landlords.

Specialist restructuring firm Alvarez and Marsal is understood to be drafting a company voluntary arrangement (CVA) on its behalf.

It hopes to strike a deal on Toys R Us's debts which will allow it to continue trading without being pursued for the money it owes.

A Toys R Us spokesperson would not comment on the CVA proceedings, shop closures or job losses.

The CVA process is separate to bankruptcy protection proceedings involving Toys R Us's US parent company, which were announced in September.

'More to come'

Retail analyst Kate Hardcastle, from Insight With Passion, said the challenge facing Toys R Us is a common theme of retailers.

"Toy retailers, fashion retailers, everyone is going to reduce the size of their stores. It's coming. In the coming 24 months you will see a lot more of this sort of news," Ms Hardcastle said.

Ms Hardcastle said Toys R Us was particularly exposed to the rise in e-commerce because customers are most comfortable buying toys and electronics online as they offer big-name, trusted brands.

"There isn't a bigger branded industry. If I'm buying Lego: Lego is Lego, is Lego".

"Toys R Us has aisles and aisles stacked high with products, but they will never win that fight with the internet."

Ms Hardcastle said Toys R Us was stuck between the extensive range and lower pricing of online retail and the theatrics and free entertainment offered by toy stores such as Hamleys, Lego and Disney stores.

"Toys R Us does not fit into either of these market spaces".