And its vendors have been curtailing shipments amid concern that Toys "R" Us might not be able to pay its bills.
Shares of USA toy companies Mattel Inc and Hasbro Inc fell on Monday on concerns that retailer Toys "R" Us, a major customer, could be filing for bankruptcy protection before the holiday sales season.
A combination of industry trends and specific mistakes have hurt Toys "R" USA, experts say.
"Toy companies also have to deal with the fact that many kids are increasingly playing games on consoles, phones and tablets and not with old-school action figures, dolls and other toys", CNN reported.
"R" Us welcomes holiday shoppers on November 24, 2016 in Paramus, New Jersey.More news: Hostaged Marawi priest Chito Soganub rescued
A representative for Toys "R" Us declined to comment. They company is proud of the fact that they stock a broad selection of toys, but that has often meant they only kept a few of each item in any given story. But that has continued to be a problem. It now has more than 800 stores in the United States and more in other countries all over the world. The company has been saddled with the vast debt pile ever since buyout firms KKR and Bain Capital took it private for $6.6bn in 2005.
Reorg Research said a bankruptcy filing could be made in Virginia as soon as Monday.
Toys "R" Us is the second-largest USA toy retailer behind Amazon.com Inc, according to data compiled by Muller.
CNBC reported earlier this month that the ailing firm had hired restructuring advisers from law firm Kirkland & Ellis.