Toys 'R Us Plans to Open 350 'Holiday Express' Stores

At a time when many retailers are shutting store locations, Toys 'R Us is making a bold move of boosting its retail presence during its most critical selling season.

Toys R Us Holiday Express store
Source: Toys R Us
Toys R Us Holiday Express store

The toy retailer is expected to announce that it will open 350 "Holiday Express" stores by early October. This significant expansion will include more than 80 Holiday Express "pop-up" stores, which temporarily will open nationwide in malls and other shopping centers, and more than 260 Toys 'R Us Holiday Express shops within the company's Babies 'R Us stores.

"We're aggressively expanding our toy-selling footprint to make Toys 'R Us more accessible than ever for busy shoppers this holiday season," said company Chairman and CEO Jerry Storch.

Although the company is still determining its staffing plans for the holiday season, it expects to hire about 1,000 workers for the Holiday Express stores alone, a company spokeswoman said. Those locations will be substantial, averaging about 4,000 square feet in size, and located in major markets from California to New York. These locations may close by mid-January, but exchanges and returns can be made at other Toys 'R Us or Babies 'R Us sites afterward.

The additional stores will "increase the convenience for the customer," said Storch in an interview with CNBC. "We are the toy authority, and we want to increase the brand's penetration."

Toy stores have been facing increasing competition from discounters, especially Wal-Mart Stores , as consumers look to stretch their dollars and make fewer trips to the store. The hope is that Toys 'R Us will pick up extra sales when consumers hit the mall.

"I think it makes a lot of sense," said Sean McGowan, an analyst at Needham & Co., who tracks the toy and leisure industries.

According to McGowan, the addition of pop-up stores is a logical step for the retailer to make and it is not a "desperate" attempt to reclaim lost market share.

Toys 'R Us is making the decision "from a position of strength," he said, adding that the company is managing its business well and monitoring its expenses well.

Merry Christmas, Mall Operators

The pop-up stores are sure to be an early Christmas present for mall operators, who are hungry for new tenants in the wake of store closures and bankruptcies that have hit the retail sector.

For example, at one mall in New Jersey, the Holiday Express store will be located in a spot that used to house Fortunoff, a jewelry and home goods retailer that was liquidated earlier this year.

Also, since the bankruptcy of KB Toys, many malls are lacking a national toy chain to bring in consumers during the holidays.

Toys 'R Us has typically put its stores en route to the mall, but not at the mall itself.

But the additional stores will be aimed at providing consumers with an extra layer of convenience. These locations may carry a different mix of toys than the traditional Toys 'R Us locations, Storch said.

For example, they will carry the hottest toys of the season, but may not sell larger items such as playground equipment.

As for the shops that will be added to the Babies 'R Us locations, the company express these sites will provide about 2,500 square feet of toys, which is nearly triple the space generally allotted to toys in Babies 'R Us stores.

Storch said the Babies 'R Us stores will still provide customers with a range of baby-related items, but the layout of the stores will be compressed to accommodate all the products.

According to McGowan, this is a good use of the Babies 'R Us stores, which tend to see a slightly lighter sales volume during the holidays as consumers focus their spending on other items. Overall, Toys 'R Us makes the vast majority of its sales in the fourth quarter of the calendar year.

The key question: Do these locations add to Toys 'R Us sales, or do they merely shift spending from a stand-alone store to the mall? That's the risk, but it is one that Toys 'R Us is willing to make.

Storch said the company can afford to take that risk because it focuses on selling toys all year long.

"We don't ramp up and have to get out," he said.

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