Toys R Us gets serious for holidays

NEW YORK — Toys R Us Inc. is determined not to let Wal-Mart Stores Inc. spoil its holiday season.

With its future dependent on the outcome of 2004 holiday shopping, Toys R Us is focusing more on setting itself apart from discounters that have battered its sales in recent years. So the nation’s second-largest toy retailer is stocking its shelves earlier than it did last year, has more exclusive merchandise and is making its stores look more interesting and inviting.

“We are looking at making the shopping experience magical, where consumers will find things in the store they don’t expect,” said John Barbour, who became president of Toys R Us’ U.S. stores in August as part of the company’s restructuring. He had been president of Toys R Us International.

And, he added in a telephone interview, “We are not going to be embarrassed by price.”

Wayne, N.J.-based Toys R Us has steadily lost market share to discounters, particularly Wal-Mart, which carry many of the same toys but at lower prices. In August, Toys R Us, whose profits plunged more than 60 percent last year, said it was considering selling its toy business; how it fares this holiday season will be a big factor in its decision.

The season could turn out to be another big disappointment if Wal-Mart again slashes prices as deep and as early as it did last year, a move that, in addition to squeezing Toys R Us, contributed to the bankruptcies of FAO Schwarz and K-B Toys Inc. It’s also expected that discounter Target Corp. will be even more aggressive on price.

To lure shoppers, Toys R Us is selling toys that can’t be found elsewhere, having worked with toy makers to develop more exclusive products. Among them are a miniature Hummer from Little Tykes and a fashion mall for Barbie from Mattel.

Toys R Us is also hoping to recharge sales of past holiday hits such as Fisher-Price’s Hokey Pokey Elmo and Hasbro Inc.’s Go Go My Walking Pup, an interactive plush dog, by becoming the exclusive seller.

Barbour said he feels encouraged by what he believes are “a lot more good toys,” this season compared with a year ago. They include personal video players for preteens, more electronic learning toys and modern versions of retro products like Schwinn’s Sting-Ray bike.

Despite its market share losses, Toys R Us does have many fans. Melody Campbell-Goeken, of San Antonio, said that although prices are lower at Wal-Mart and Target, she expects to do most of her holiday toy shopping for her 8-year-old son at Toys R Us because the retailer offers “bigger variety of the same type of products.”

Marty Kotis, of Greensboro, N.C., who has a 19-month-old son, agreed, noting that “being able to choose from all the different options is a lot more important than getting the best price.” Last holiday season, Kotis did the bulk of his shopping at Toys R Us, and expects to do the same this year.

Analysts say its merchandise selection may be a key to Toys R Us’ future — it may need to be less of a mass merchant and more of a specialty toy store. “I still believe strongly that there is a great opportunity for a smaller version” of Toys R Us, said Bob Kerson, chairman of Kerson Partners Ltd., a Greenwich, Conn.-based executive search firm whose clients have included the toy retailer.

That would require further changes at its stores, including a greater focus on customer service. While Toys R Us has tried to improve service, analysts say it still has work to do, including cleaning up its untidy stores.