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Why Toys R Us is rising from the ashes

·Anchor, Editor-at-Large
·4 min read
In this article:
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Toys R Us has some new owners that may not be so crazy to ponder opening up physical toy stores once again.

Brand management company WHP Global said Monday it has acquired a controlling interest in Tru Kids, the parent company of the Toys R Us, Babies R Us and Geoffrey the Giraffe brands. WHP Global reportedly plans to open Toys R Us stores ahead of this holiday shopping season.

"Our investment in Toys"R"Us reflects our belief and passion for the brand. We are thrilled to be taking the reins of the world's leading toy brand at a time when the category is up 16% and consumer demand for toys is at an all-time high. This is a natural fit for WHP, as we can leverage our global network and digital platform to help grow Toys"R"Us and Babies"R"Us around the world," said WHP Global Chairman and CEO Yehuda Shmidman in a statement.

Shmidman has served as Tru Kids vice chairman since 2019.

Toys R Us went through a highly publicized bankruptcy liquidation in 2017 after years of struggles and tough competition from Amazon and Walmart. But the chain’s long-time chief merchant Richard Barry bought the rights to the brand name and housed it under a corporate name called Tru Kids. He moved fast to secure a distribution deal with Target and opened two stores (New Jersey and Texas) — but the Target deal ended fairly quickly and the stores closed in 2020.

Barry will move to a CEO emeritus role for Tru Kids as part of the deal with WHP Global. He did not return Yahoo Finance's request for comment on the deal.

Toy industry experts said it would make sense for WHP Global to push forward with Toys R Us store openings given the ongoing void in the industry left from when the toy chain went bust. But the store layouts and inventory have to be well thought out, ditto for any distribution agreements.

Closing down signs are seen outside the Toys R Us store in Coventry, Britain, March 13, 2018. REUTERS/Hannah McKay
Closing down signs are seen outside the Toys R Us store in Coventry, Britain, March 13, 2018. REUTERS/Hannah McKay

"While the U.S. toy industry has shown incredible resilience in the absence of Toys R Us, there is still a massive hole for a truly national toy store chain. The key is doing it right — pandemic challenges aside, the experiment with [retailer] B8ta and the short-lived e-commerce play with Target were wrong moves, because at the end of the day, a toy store should be about getting families excited about toys. It wasn’t the right balance between experience and assortment," deputy editor of ToyBook James Zahn told Yahoo Finance.

Continued Zahn, "Where Toys R Us could succeed is by being a middle ground between what they were and what the independent toy stores are now. A smaller store model that packs in a wide assortment of toys that can cater to kids, families, and the collector market could be a game-changer. While retailers like Target have done a great job of increasing assortment and spreading their wings into categories like gaming and collectibles, the industry lacks that big incubator — a retailer that will take chances on new lines by putting them in front of consumers for the type of visibility that you don’t get by looking at a screen. There’s also still much to be said about the ‘magic’ of a big toy store, and we’re now in the first generation of kids in roughly 70 years that doesn’t have that."

And there is an opportunity for Toys R Us stores to re-enter the market at a potentially lucrative time.

For one, consumers will likely be in a far better position financially for holiday season 2021 than holiday 2020 as the pandemic begins to enter the rearview mirror. That opens the door to robust spending on toys for the all-important holiday shopping season.

Meanwhile, the return of blockbuster movies this year from the likes of Disney stand to be a key driver of toy sales for main players Hasbro, Mattel and Funko (and by extension, Toys R Us, if it can open its stores in time).

"There are five [new] TV shows, and five movies from Marvel and great video games coming out [this year]," Funko CEO Brian Mariotti told Yahoo Finance Live. "The content slate is crazy good, but not just crazy good in 2021 but also in 2022 and beyond."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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