Toys R Us Canada Bankruptcy: A Stark Warning on Retail Investment Risk

The toy empire that once symbolized childhood for a generation is accelerating toward a structural collapse in Canada. Recent court filings reveal that several major landlords have filed lawsuits against Toys “R” Us Canada, alleging a chronic failure to pay rent and related expenses totaling over $31.3 million.

According to documents submitted to the Ontario Superior Court, the retailer failed to meet its lease obligations across multiple locations between 2024 and 2025, triggering at least seven major lawsuits from prominent landlords, including RioTrin Properties (under RioCan REIT) and Calloway REIT.

Massive Store Closures: More Than a “Short-term Adjustment”

Toys “R” Us Canada has already retreated from several disputed sites and shuttered dozens of locations nationwide. Public data shows the store count has plummeted to approximately 40 locations, a drastic reduction from its peak.

Jenna Jacobson, Director of the Retail Leadership Institute at Toronto Metropolitan University (TMU), noted: “The biggest issue isn’t just these lawsuits; it’s whether Toys ‘R’ Us will even exist a year from now.” She identified four overlapping structural pressures:

• The continued migration of toy consumption to online platforms.

• Margin compression from giants like Amazon and Walmart.

• Tightening Canadian consumer spending.

• Exorbitant commercial real estate rents magnifying operational risks.

The “Lease Domino Effect” and Cash Flow Rupture

Court filings highlight strict lease clauses: a single month of arrears can trigger a requirement for a three-month rent prepayment plus the immediate settlement of all debts. Landlords state that these are not isolated incidents but represent consecutive periods of non-payment. In many cases, Toys “R” Us Canada has failed to even file a formal defense, signaling a transition from “liquidity hurdles” to a systematic cash flow rupture.

The Architect of “Resurrection”: Doug Putman

Currently operated by Putman Investments (led by CEO Doug Putman), the brand was acquired in 2021 from an affiliate of Fairfax Financial Holdings. Putman, known for acquiring distressed assets like HMV and Sunrise Records, attempted to revitalize the brand through experiential retail concepts. However, despite securing a $120 million financing facility from Gordon Brothers in late 2024, the downward trend remains unreversed.

Cracks are appearing across Putman’s entire portfolio:

• Rooms + Spaces: Disappeared.

• T. Kettle: Closed in late 2024.

• Everest Toys: Placed into receivership over a $25 million debt to TD Bank.

💡 AIF Insight | Proactive Risk Mitigation: The True Measure of Investment Capability

In this unfolding news story, one critical detail demands the highest vigilance from investors.

In the past, some of our portfolios held allocations in assets related to Putman Investments, which performed reasonably well in their early stages. However, based on our continuous tracking of their business models, capital structures, and management behavior, Ai Financial proactively slashed these allocations over the past two years. Currently, exposure is maintained at less than 5% in only a select few client portfolios.

The reason is clear: Doug Putman’s actions are fundamentally speculative, not investment-driven.

• Relying on high leverage and external financing to “bail out” distressed assets.

• Using conceptual innovation to mask structural cash flow deficiencies.

• Building a “resurrection story” on the back of continuous capital infusions.

This contradicts the core investment philosophy of Ai Financial. True investment must be long-term and value-based. It follows the principles of intrinsic value rather than gambling on the hope that “this time, it might come back to life.”

Today, as news of unpaid rent, closures, and receiverships hits the headlines, those still heavily overweighted in these assets find themselves with no exit strategy, facing substantial principal losses. This is the watershed moment between investment and speculation.

We Don’t Just Interpret the News; We Hedge Against the Risk Before It Breaks

The value of news is not in “proving who was right after the fact,” but in identifying who made the necessary adjustments before the risks became visible to the public. Once again, the market has validated an enduring truth: Adhering to a correct investment philosophy is a capability in itself. This capability is reflected in foresight, discipline, and a profound understanding of risk.