But a Toys "R" Us spokeswoman says that the conversion of the Union Square store into Babies "R" Us will not be a strategy the company plans to employ across the country. "We have been looking for a location in Manhattan for a while," she says, explaining that the Toys "R" Us flagship store in Times Square would sufficiently represent the chain in that borough.

The move is a "slam dunk" for Toys "R" Us, says Chris Byrne, a New York City-based independent toy consultant. "It really gives them a beachhead in Manhattan. It seems like a very smart move for them at this time." Byrne predicts that the company could open more Babies "R" Us units in the city, but doubts the retailer will begin a chain-wide conversion of Toys "R" Us stores in Babies "R" Us units.

The spokeswoman says the company has not released expansion plans for the Babies "R" Us chain, but says they could go into the spaces of 15 former Kids "R" Us stores the company has retained. Toys "R" Us closed that chain last year and sold most of its former shells to Office Depot in the spring. The company currently operates 215 Babies "R" Us units across the country.

Earlier this year, Wayne, NJ-based Toys "R" Us officials announced plans to separate the Babies "R" Us business from Toy "R" Us saying the company might try to sell the latter. Private firms Kohlberg Kravis Roberts, Bain Capital, Cerberus, as well as Permira and Apollo Advisors are bidding for the 1,200-store chain, which is valued at about $3.5 billion.

In its last quarter, the company reported a net loss of $25 million. During that period, the US toy business posted a 1.7% same-store sales decrease, while Babies "R" US comparable sales jumped 5.6%.

Instant Insights /

Babies "R" Us Enters Manhattan

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