TRU eyes US expansion

Toys R Us is looking to expand its operations with a number of joint Babies R Us and toy store openings.
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The firm will open 16 superstores side-by-side with Babies R Us outlets this year, each with combined retail space of 60,000 square feet to 70,000 square feet. The company also will convert "dozens" of existing toy stores into smaller side-by-side locations this year, and within a "few years" will turn the rest of its 585 US outlets into the format or build new superstores, Storch added.

In the year ended February 2nd, the firm earned $153 million, up 40 per cent from a year earlier. Sales climbed 5.7 percent to $13.8 billion. It was the second consecutive year of increases. Sales of US stores open a year or more gained 2.2 per cent, while toy sales fell industry-wide.

Some analysts predict the company will go public within the next two years if it can keep up the gains. One major issue is the need to deal with $5.8 billion in debt, a hangover of the buyout by Vornado. Toys R' Us says it will finance its store changes internally.

"What they've done is a tremendous achievement given the amount of debt they've been bogged down with, but I have my doubts about whether they can turn this thing around," added Howard Davidowitz, a retailing consultant in New York. He notes that Wal-Mart and Target are expanding more rapidly than Toys "R" Us, and "that's going to really hurt them."

The side-by-side siting strategy addresses a weakness that has handicapped the company in battling big discounters. In the past, TRU shoppers with children have visited an average of once every nine months, while Wal-Mart and Target have drawn these shoppers weekly with a broader array of goods, according to Sean McGowan, an analyst for Needham & Co in New York.

Toys R Us says that in its pilot side-by-side locations, moms visit Babies R Us stores almost monthly, and when they do, often visit Toys R Us for their other children.

The firm has closed 86 toy stores in the past two years, and taken some profits from real-estate sales for its new owners. But over the period, it has boosted Babies R Us outlets from 30 to 260, and added 74 Toys R Us stores abroad, bringing the number of international toy stores to 715.


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