Party City to open Toy City stores in wake of Toys R Us demise

Key Points
  • Party City will open roughly 50 Toy City pop-up stores in September.
  • The locations will sit alongside its Halloween City shops and run through the holiday season.
  • The company hopes to capitalize on Toys R Us' demise, which left a void in the toy industry.
Party City is opening up about 50 Toy City pop-up stores, in wake of Toy R Us' demise
Party City is opening up about 50 Toy City pop-up stores

Party City said Monday it will open about 50 Toy City pop-up stores this year as Toys R Us finishes closing its last stores this week following its September bankruptcy.

Party City said it will roll out the temporary locations alongside its Halloween City pop-up shops in "optimal" markets where it found "attractive leasing opportunities." Many retailers have been able to negotiate favorable rents and lease terms because of a glut of vacant stores.

The company hopes it will be able to fill a void left by Toys R Us' demise. Companies like Walmart, Target, Barnes & Noble and Five Below are expected to win some share of the market over time, as toy vendors look for other venues to sell their merchandise. KB Toys is also planning a comeback.

"The creation of a Toy City concept to complement our temporary seasonal retail strategy is a logical extension of our brand; one that will allow us to leverage our existing pop-up store capabilities and capitalize on the category whitespace that has recently been created," Party City CEO James Harrison said in a statement.

The company said its pop-up shops for toys will open in September and run through the holiday season.

Party City also will be expanding its online assortment of toys, according to Harrison.

"Throughout the retail reporting cycle, we've heard from a number of large and mid-sized retail chains that they expect to step in to compete in toys in a more meaningful way post-TRU," Jefferies analyst Stephanie Wissink said in a recent note to clients.

She added she expects more than 75 percent of Toys R Us' annual share of the toy industry to be "reclaimed" in time, as retailers determine what their strategies will be to win shoppers' dollars.

Party City's moves are reminiscent of those of Toys R Us in 2010, after KB Toys filed for bankruptcy protection and shuttered its fleet of stores. This left many U.S. malls without a toy retailer. Looking to capitalize on the opportunity, Toys R Us opened hundreds of pop-up shops in malls and outlet centers ahead of the 2010 holiday season. Some of them were kept open permanently.

Ultimately, though, Toys R Us was hamstrung by debt payments and forced into liquidation when it couldn't keep pace with Amazon or invest in its business.