- The Toys R Us brand is teaming up with Macy's to open more than 400 shop-in-shops inside the retailer's department stores, the companies announced in a press release.
- Macy's has also launched a co-branded page with Toys R Us, which is owned by WHP Global, on its website to sell toys online. The page is currently live.
- The physical shops are set to roll out in 2022 and will include vestiges of the Toys R Us brand. "[C]ustomers will be welcomed by Geoffrey the Giraffe before discovering and playing across dedicated sections by age, interest and category, with interactive experiences, activation centers and iconic elements throughout," the companies said.
More than three years have passed since the big-box version of Toys R Us collapsed in bankruptcy and liquidated more than 700 box stores. Since then, the toy market has sorted itself out, to a degree, with the retailer's main market share competitors happily filling the vacuum left by the toy store chain.
The year that Toys R Us liquidated, a range of retailers eagerly tried to get a piece of the pie, including Party City, Kohl's, J.C. Penney, Kmart and others. Macy's has also dabbled in the category since then.
On a Thursday conference call, Macy's CEO Jeff Gennette told analysts the partnership with Toys R Us grew out of the toy business the retailer launched through its off-price Backstage segment, where toys were a "standout" category. With the Toys R Us partnership, Macy's toy business could expand fourfold, Gennette said.
That may sound like a lot, but the toy category didn't even get a mention in Macy's conference call or press release on the fourth quarter — when toy sales matter most. Gennette acknowledged on Thursday's call that Macy's market share in toys is "quite small."
The partnership is not a first for the two brands; they opened pop-ups together nearly a decade ago. The current team-up allows Macy's to expand its toy assortment, get access to Toys R Us' private label products and get a partner in marketing its stores, according to Gennette. Macy's also sees the Toys R Us partnership as a chance to lure in an important demographic. Gennette said millennial parents who shopped at Toys R Us as kids are "an opportunity for us as part of our under-40 strategy."
A department store would be a historically ironic heir to Toys R Us' forfeited market share. The retailer was a quintessential "category killer." As Toys R Us grew, toy departments shrank in mall-based department stores. It was the rise of a new kind of generalist — namely the big-box discounters Walmart and Target as well as Amazon — that began to pick away at Toys R Us' share.
Diminished sales on top of more than $5 billion in debt, stuck on Toys R Us' balance sheet after a private equity buyout, sent Toys R Us into a death spiral. As it serviced debt and passed cash to investors, Toys R Us' stores went into decline. It also lacked capital to invest in digital operations. Sales fell more, and the company fell into bankruptcy, where Toys R Us met its end after lenders — including Oaktree Capital, a backer of WHP Global — pulled the plug on the company.
Since the liquidation, the Toys R Us brand, which the retailer's lenders initially took ownership of, has tried to maintain its relevance. It launched experiential pop-ups, an online collaboration with Target, and then Amazon. It opened its own stores through a joint venture with b8ta, which closed amid the pandemic. Meanwhile, Walmart, Amazon and Target largely divvied up market share in toys among themselves.
Earlier this year, the company that owns the Toys R Us brand assets sold a controlling stake to brand management specialist WHP Global, which is backed by two prominent investment firms and owns the Anne Klein and Joseph Abboud brands. WHP has since taken over the Toys R Us business, with WHP Chairman and CEO Yehuda Shmidman assuming the same roles with Toys R Us.
In the release, Shmidman said, "Our partnership with Macy's marks the greatly anticipated return of Toys R Us in the U.S.A., and changes the retail landscape by combining two beloved retail brands together for consumers across the nation in a completely innovative way."
Time will bear out whether that is true or wishful thinking. To date, the Toys R Us brand's reboot efforts have come up short. For that matter, so have Macy's.
Daphne Howland contributed to this report.