Toys R Us 'will survive in a different form' as online competition grows, former CEO says

  • Former Toys R Us CEO Jerry Storch said the toy retailer will likely take on a different form as it fights off e-commerce competition.
  • Storch, the founder and CEO of advisory firm Storch Advisors, said it will take "tremendous investment" online and in stores for retailers to survive in the future.

Even during the holidays, former Toys R Us CEO Jerry Storch couldn't deny that toys are "a very tough business." (At 4:00 mark of interview)

"It got a lot worse when Amazon got in," Storch, also founder and CEO of Storch Advisors, told CNBC's "Closing Bell."

The rise of e-commerce has effectively dovetailed one of the toy business' top moneymaking strategies, Storch said: raising the price of a small number of red-hot products at the right time.

"The internet's a perfect vehicle for trashing the margins on those products," Storch said, adding that Toys R Us' baby business is also struggling against competitive pressures.

"I'm sure, though, that Toys R Us will survive in some form" as e-commerce giants such as Amazon and Walmart take market share in the toy space, the CEO said. "Toys R Us will survive in a different form."

The key to surviving? Storch, the former CEO of Canadian retailer Hudson's Bay, cast it as a balance between scale and investment.

"It's going to take tremendous investment on the internet and in stores to be a retailer in the future," he said, naming Amazon and Walmart the anointed winners of this holiday season.

And while some retailers, such as DIY giants Home Depot and Lowe's and off-price favorites TJX and Burlington Stores, will continue to do well no matter what, others will need to sacrifice, Storch said.

"There's going to be significant consolidation ahead; there's going to be more store closings," the CEO predicted. "Those that are best capitalized are the ones that are going to survive."