Invest1 publisher2 min readPublished
Toys "R" Us returns with 120 stores that its former chief says may sell like a handful of old ones
Toys "R" Us is opening 120 US stores this holiday season aimed partly at adults, whose toy buying rose 25% in the first half. Its former chief estimates 100 of the smaller shops would sell what a handful of the old ones did, so the season is a test of a cheap format.
The Investor · Invest desk
What happened
- Toys "R" Us plans to open 120 stores across the US this holiday season, nine years after the chain filed for bankruptcy.
- Some of the new stores will include Creator Studios, where toy brands and creators can film videos, unveil products and hold launch events.
- Gerald Storch, who led the chain from 2006 to 2013, estimates 100 of the new smaller stores might match the sales of a handful of the old ones.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- constraint Even a strong holiday at stores this small adds up to a few old stores' worth of sales, too little to show whether collectors could carry larger formats.
- decision Stocking for fandom leaves the price-and-convenience gift shopper to Amazon, Walmart and Target, where Saunders said parents' priorities can send them.
- capability Creator Studio launches reach viewers at home as well as in the aisle, so a store's own sales will understate what it does for the brands using it.
Jamie Uitdenhowen, the retailer's executive VP at WHP Global [16], said: "We're not trying to recreate the Toys 'R' Us of the past" [5]. Gerald Storch, who ran the chain from 2006 to 2013, expects the new stores to be smaller and cheaper to open, and compared them to the pop-ups in malls and shopping centers [7]. Apply his sales ratio to 120 stores, taking a handful as five, and the fleet sells what six of the old stores did [1]. The chain that went under closed more than 800 [2]. Six out of more than 800 is under 1% [2].
The demand case rests on Circana's first-half figures: US toy sales up 17%, toys bought for adults up 25% [3]. Adult buying grew about 1.5 times as fast as the market, eight points ahead [3]. Circana's numbers, as reported, do not include the adult share of toy spending, so the 25% could sit on a large base or a thin one. "Adults are increasingly buying toys, collectibles, and trading cards for themselves, and fandom has become an important part of the category," Uitdenhowen said [4].
Neil Saunders, a retail analyst at GlobalData, said the old chain did not collapse simply because shoppers lost interest [12]. Bain Capital, KKR and Vornado Realty Trust bought it in 2005 for $6.6 billion, financed heavily with debt [10]. It owed more than $5 billion when it filed in 2017, and that left it little room to adapt as shopping habits changed, Fortune reported [11]. Twelve years after the buyout, the debt was still at least 76% of the price paid [4].
The adult demand could prove brittle. If it follows crazes such as Labubu blind boxes and Sonny Angel figures [15], the 25% can reverse as fast as it arrived. Saunders offered a steadier explanation. "People are looking more for those kinds of craft-based, quiet activities where they can just take a moment out and sort of disconnect from the noisy world," he said [13]. Storch's case is the name itself. "The brand's incredibly powerful," he said, calling the expansion a "smart move" [9].
I think the small format fits what the evidence supports: a fast growth rate on an unknown base, tested in stores that cost less to open [7]. Storch himself cautioned against measuring the comeback by store count alone [8]. The collector thesis is wrong if the stores have a busy holiday while adult toy sales slow in Circana's later data, because then parents carried the season.
What to watch
- Whether the chain adds stores or closes some once the holiday season ends.
- Which toy brands book Creator Studio launches, and how often.
- Whether WHP Global publishes per-store sales that would test Storch's handful estimate.