Toys R Us debt could force the retail giant into bankruptcy, as the company has hired a law firm to help restructure $400 million in debt due in 2018.
Law firm Kirkland & Ellis will help the company reorganize, which could include bankruptcy or refinancing the debt without seeking such protection, CNBC reported.
"As we previously discussed on our first quarter earnings call, Toys R Us is evaluating a range of alternatives to address our 2018 debt maturities, which may include the possibility of obtaining additional financing," Toys R Us spokeswoman Amy von Walter said in a statement, according to CNBC.
"We expect to provide an update about these activities, as well as the many initiatives underway to provide an outstanding customer experience in our global retail locations and webstore during the holiday season, during our second quarter earnings call," she added.
Toys R Us has experienced a decline in sales in recent years thanks to competition from rivals like Amazon.com and Walmart.
"While the decision of Toys R Us to appoint restructuring advisors is not necessarily a sign that bankruptcy is imminent, it is an indication that the company is in a very uncomfortable financial position," Neil Saunders, managing director of GlobalData Retail, said, according to Fortune.
The company is owned by Kohlberg Kravis Roberts, Bain Capital Partners and Vornado Realty Trust. Toys R Us reported a 4.1 percent drop in same-store sales and a net loss of of $164 million during the first quarter of 2017, CNBC noted.
"It suffers competition from online and physical generalists who happily discount toys to drive customer traffic and sales for stores and websites," Saunders said about Toys R Us' financial woes.