Toys R Us, ghost of Christmases past, is set to return in U.S. this holiday season
Maybe American kids won’t have to live through another Christmas without Toys R Us.
About a year after shutting U.S. operations, the remnant of the defunct toy chain is set to return this holiday season by opening about half a dozen U.S. stores and an e-commerce site, according to people familiar with the matter.
Richard Barry, a former Toys R Us executive who is now chief executive of new entity Tru Kids Inc., has been pitching to toy makers his vision to reincarnate the chain, including at an industry conference this week, said the people, who asked not to be identified because the plans weren’t public.
The stores are slated to be about 10,000 square feet, roughly a third of the size of the brand’s big-box outlets that closed last year, the people said. The locations will also have more experiences, such as play areas. The startup costs could be minimized with a consignment inventory model in which toy makers ship goods but don’t get paid until consumers buy them, some of the people said.
A spokeswoman for Tru Kids said the company wasn’t ready to publicly share details on its U.S. strategy.
New rivals
It remains to be seen how much of a boost the Toys R Us comeback will provide the toy industry, which includes giants such as Hasbro Inc. and Mattel Inc. The original Toys R Us — the only national toy chain — left a huge hole when it went under. It had been generating about $7 billion in sales a year in the United States through more than 700 locations, including its Babies R Us brand.
Walmart Inc., Target Corp. and Amazon.com Inc. have swooped in to fill the void. They have all expanded toy assortments and marketing, including a printed toy catalog from Amazon. Other nontraditional chains jumped into the category, including grocery stores and Party City Holdco Inc.
There is also a question of how many toy makers will do business with the new Toys R Us. Many lost money when the former company announced liquidation in March 2018, just months after filing for bankruptcy protection.
How Toys R Us was doomed by a leveraged buyout and shortsighted strategy »
MGA on board
MGA Entertainment Inc., one of the best-performing toy makers in the world, is already on board to sell at the reimagined Toys R Us shops, said Chief Executive Isaac Larian, who said he has been pitched the plan. His company is based in Chatsworth and its properties include Little Tikes, L.O.L. Surprise and Bratz dolls.
“This market needs a self-standing toy store, that’s for sure,” Larian said in an interview. “We will sell them inventory.”
Last year, Larian led an effort to buy hundreds of liquidating Toys R Us stores but ultimately dropped the bid.
During the chain’s bankruptcy, lenders led by Solus Alternative Asset Management and Angelo Gordon took control of the company’s assets. After results didn’t improve, they opted to shut down operations in the United States. Units in Australia and other regions also closed, and divisions in Asia and Canada were acquired by new owners.
This group tried to sell the intellectual property, then opted to keep it to garner a better return. As owners of the intellectual property, they have been collecting licensing and other fees from the units still operating and selling them private-label goods. The lenders then formed Tru Kids with the goal of reviving the brand in the United States and other regions it exited. It has since hired several industry veterans and signed a deal to bring Toys R Us and Babies R Us back to Australia through a partner.
