Starting Fresh Toys R Us Introduces New Store Format In An Attempt To Regain Lost Ground

Perhaps the greatest gift Toys R Us Inc. got for Christmas 1994 was the gift of foresight. The big toy retailer realized it needed to make some changes.

“It was a pretty good year, but we didn’t like the feel of what was going on,” said Michael Goldstein, the company’s chief executive officer.

Competitors like Baby Superstore, Wal-Mart and Kmart were taking business away. Toys R Us stores were beginning to look tired. So the company began laying plans to remake itself.

It was just as well, because last year turned out to be bumpy. As Toys R Us told shareholders in its annual report, “the 1995 holiday selling season was particularly difficult.”

Now, with another Christmas season approaching, the company expects to do better, partly because of a restructuring that included the development of two new store formats - a revamped toy store, and Babies R Us, a superstore for infant merchandise - and a streamlining of its bloated inventory.

Concept 2000 is the company’s code name for the Toys R Us stores of the future. The first is actually a remodeled Toys R Us in Raritan, N.J., completed in mid-July.

Shoppers pulling into the parking lot see a store with a glass front instead of brick, making the toys visible from outside, and giving the building a lighter feel.

Inside, the aisles have been reconfigured to make the store more spacious and less like a warehouse. Signs help shoppers see which toys are in which aisle. Cheerful displays similar to those in stores like F.A.O. Schwarz brighten the ambience. There’s merchandise that shoppers aren’t accustomed to seeing at Toys R Us, such as a big display of Gund plush toys.

A typical Toys R Us has about 45,000 square feet, although some stores in smaller markets measure 20,000 or 30,000 square feet. Concept 2000 is intended for bigger stores - the company plans to slowly renovate many of its other 650 stores. Every new store will be built according to the new design.

Results at the first Concept 2000 store are good, Goldstein said during an interview in the company’s Paramus headquarters. He also rapped his knuckles on the table for luck.

The changes have received favorable reviews among analysts who follow toy retailing.

“The format is much more forward-thinking. It moves Toys R Us to the consumer of today,” said Jeffrey Feiner, an analyst with Salomon Brothers Inc.

But Feiner also noted it’s too soon to know how fast changes can be made to the other Toys R Us stores. The company has said it expects to complete about 20 Concept 2000 stores this year, including four renovations.

“The stores will probably do extra-ordinarily well this Christmas, reflecting the novelty,” said Donald Trott, an analyst with Dean Witter Reynolds Inc. “But whether that’s indicative of what will happen beyond remains to be seen.”

The company also has revamped its inventory focus, reducing the number of items carried, and has been running clearance sales to eliminate slower-moving merchandise. Toys R Us took nearly $400 million in pretax charges last year to reflect the cost of the inventory overhaul, closures of 25 underperforming stores and other restructuring moves.

As part of the inventory streamlining, Toys R Us won’t necessarily stock every single version when manufacturers start cloning rivals’ products. Goldstein noted that after the toymaker Little Tykes introduced its Cozy Coupe car, other companies mimicked the design and Toys R Us carried eight different models. Several didn’t sell well, and so now the chain will carry only three or four.

The first Babies R Us store opened on Long Island in May. The store is a broad expansion of the infants’ departments in Toys R Us stores and the company’s Kids R Us clothing chain. Goldstein said the store is drawing shoppers from a broad economic spectrum, and that higher-end merchandise is selling well. The company expects to have 10 Babies R Us stores open by year-end.

In October, the company expects to open its first superstore, a 95,000-square-foot store that will encompass Concept 2000, Kids R Us, Babies R Us and offer services such as party rooms, a children’s hair salon, a portrait studio and places to eat like Pizza Hut.

The store in Elizabeth, N.J., outside New York City is adjacent to two other big retail draws, an Ikea home furnishings store and a Tandy Incredible Universe electronics superstore.