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The amount of occupied retail real estate in 77 major U.S. metropolitan areas dropped by 3.8 million square feet (350,000 square meters) in the second quarter, the largest decline since 2009, according to a report released yesterday by researcher Reis Inc., Bloomberg News reported. Shuttered stores once occupied by the company, now in bankruptcy proceedings, helped drive the national retail vacancy rate to 10.2 percent, up two-tenths of a percent from the first quarter and the highest level since 2014. “The Toys ‘R’ Us store closings impacted the second-quarter statistics more than any other retailer has in any quarter over the last nine years,” wrote the authors of the report, who tracked more than 80 Toys “R” Us Inc. store closings in over 40 metros during the quarter. Overall, 55 metros, or 71 percent of those surveyed, saw an increase in vacancies in the quarter. Among those with the biggest jumps were Little Rock, Arkansas; Fairfield, Connecticut; and Long Island, New York. Read more. 

Occupancy issues are at the heart of many significant retail cases, as detailed in the ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store. 

As Toys “R” Us Inc. stores across the United States marked their final day in business on Friday, the bankrupt toy retailer posted a farewell message to customers on its website next to an image of its iconic Geoffrey the Giraffe mascot thanking them and urging them to “Play on!”, Reuters reported. “Thanks to each of you who shared your amazing journey to (and through) parenthood with us, and to every grandparent, aunt, uncle, brother and sister who’s built a couch-cushion rocket ship, made up a hero adventure, or invented something gooey,” the message said. “Promise us just this one thing: Don’t ever grow up. Play on!” the message, playing on the company’s famous jingle, added. More than 700 Toys “R” Us stores are shuttering in the United States. Toys “R” Us filed for chapter 11 protection in September hoping to restructure some $5 billion in debt, much of which stemmed from a $6.6 billion leveraged buyout by private equity firms in 2005.

PetSmart Inc. and its parent holding company sued Citibank NA, in an escalation of the fight between the retailer and a group of lenders over the transfer of shares in PetSmart’s Chewy.com e-commerce unit, the Wall Street Journal reported. Earlier this month, the pet-products retailer transferred a 20 percent stake in Chewy.com, its fast-growing e-commerce subsidiary, to its parent holding company, Argos Holdings Inc., which is controlled by private-equity firm BC Partners. At the same time, PetSmart also transferred a 16.5 percent holding to a wholly owned subsidiary. On Tuesday, PetSmart sued Citibank, the agent on the company’s term loans, for refusing to bless the transfers of shares that puts them out of the reach of its lenders and within the grasp of its private-equity owner BC Partners. The transfer of the 20 percent stake to PetSmart’s parent company would give BC Partners control over the proceeds of any sale of those shares. At the same time, the company could pledge the other 16.5 percent stake to low-ranking debtholders in a debt swap. PetSmart has been steadily losing customers at its brick-and-mortar stores for several quarters, raising questions about its ability to service over $8 billion in debt. At the same time, its Chewy.com e-commerce subsidiary has been growing rapidly, though continuing to lose money. A valuation expert hired by PetSmart assessed Chewy.com to be worth between $4.15 billion and $4.75 billion, a big jump from the $3 billion purchase price PetSmart paid last year, according to the lawsuit.

The Supreme Court backed American Express Co.’s policy of preventing retailers from offering customers incentives to pay with cheaper cards, a major victory for the company that puts its business model on solid legal ground, the Wall Street Journal reported. The court’s decision handed a loss to a group of more than a dozen states and the Justice Department, which challenged an AmEx policy that prohibited retailers and other businesses from offering consumers discounts or incentives to pay with cheaper cards. Merchants incur so-called swipe fees when customers pay with a card; AmEx historically has charged higher swipe fees than its competitors, which it has justified to merchants on the grounds that its customers spend more. The high court, in a 5-4 opinion by Justice Clarence Thomas, said that government antitrust enforcers were unable to meet their burden of proving that the AmEx anti-steering rules harmed consumers. The decision split the court along ideological lines with conservative justices in the majority.

Jerry Storch, a former chief executive officer of Toys “R” Us, has been working with multiple investors on a plan to reboot the retailer in the U.S., Bloomberg News reported. Credit Suisse Group AG is being used as a financial adviser and the discussions have included Fairfax Financial Holdings Ltd., the investment firm that acquired the Canadian unit of Toys “R” Us. Any comeback is considered to face long odds because of how far the former market giant has fallen. There are also concerns that it might be too late to restart the business in time for this Christmas-shopping season. Read more. 

In related news, Toys "R" Us will close its final 200 US stores on Friday, CNNMoney.com reported. Toys "R" Us filed for bankruptcy in September in hopes of turning around, but bad Christmas sales left it on life support. The chain had 735 US stores when it announced plans to go out of business in March. The 70-year old company will continue in some other countries, such as Canada. In addition to competition from big box retailers and online rivals like Amazon, Toys "R" Us was left in a difficult financial position by an unsustainable debt load that came in the wake of being taken private by KKR, Bain Capital and real estate firm Vornado in 2005. Read more. 

The businesses most hurt from the U.S. Supreme Court’s internet tax ruling aren’t the big online retailers — instead, the losers will likely be the millions of small-business owners who sell on marketplaces such as Amazon.com Inc. and eBay Inc., the Wall Street Journal reported. The Supreme Court on Thursday overturned a longstanding precedent that states can only require retailers to collect sales tax when they have a physical presence there. The old rule enabled online commerce to boom and helped drive an explosion of small businesses that sell their wares across online platforms. But the new decision means that those millions of small businesses may now need to collect and remit sales taxes in the 45 states that have them. That could be an expensive and time-consuming task, especially if new rules differ between states.

Bankrupt jewelry seller Claire’s Stores Inc. will spend the summer evaluating potential buyers after a judge ordered the retailer to open up the sale of the company to all bidders, WSJ Pro Bankruptcy reported. Bankruptcy Judge Mary Walrath on Friday set an Aug. 31 deadline for bids for the company, part of a revived marketing process ordered in response to creditor complaints that Claire’s previous attempts to sell itself were flawed. Claire’s, which filed for bankruptcy protection in March, said it looked for buyers before and after agreeing to a restructuring deal backed by the retailer’s private-equity owner Apollo Global Management and top ranking lenders, Elliott Management Corp. and Monarch Alternative Capital LP, but came up empty-handed. Bondholder Oaktree Capital Management criticized the marketing process as being designed to ward off competition. Among other things, Claire’s insisted that bidders offer cash only, and in an amount sufficient to pay off first-lien debt.