Toys 'R' Us to Shutter 64 Stores, Cut 1,900 Jobs

The plan is to shutter 27 underperforming toy stores in the US, as well as 37 Kids "R" Us clothing stores. The company will leave its international stores, and its Babies "R" Us and Imaginarium operations alone for now. Toys will also consolidate its HQ and administrative operations, spread between Paramus, Montvale, East Hanover and Fort Lee, NJ to the 575,000-sf Pointview Corporate Park in Wayne, NJ that it acquired last fall from WP Commercial for $36.5 million (see earlier story).

"The stores being closed were cash-flow positive, but weren't meeting our return objectives, company chairman/CEO John Eyler explained when the cuts were announced."The investment of significant capital to renovate these stores to the 'Mission Impossible' format wouldn't be prudent."

"Mission Impossible," of course, is Toys' new, more customer-friendly prototype. Units converted to that format did better than older stores during the recent holiday season, according to company officials. And a number of existing stores are slated for conversion or direct replacement—for example, the 35,000-sf store in Eatontown, NJ will be replaced by a 50,000-sf Mission Impossible.

Despite its name and specialty, Toys is a distant second to discounter Wal-Mart when it comes to selling toys. The company has been described by analysts as becoming less competitive all the time, and the downsizing is aimed at making it leaner and more competitive for the toy wars ahead.

"They're trying to compete with Wal-Mart," confirms Faith Hope Consolo, vice chairman of Garrick Aug-Worldwide, New York, "and they're always going to have competition from a retailer like F.A.O. Schwartz, who was just taken over by a new owner that is going to retool and expand them. Also, [Toys 'R' Us'] Times Square store put a big hole in their budget, I'm sure. Don't forget, they had 100,000 sf to build, and it's a big rent number every year."

Was the Times Square store the best choice? "I think it was the most expensive choice," says Consolo, who was involved in the deal early on. "Times Square is one of the most expensive locations, and if it doesn't work they're going to have a problem. I just don't know if they can afford to have such a showcase.

"I think Toys 'R' Us cares if they make money," says Consolo. "They have to sell a lot of toys, and quite frankly F.A.O. Schwartz is the number one toy store in New York because it's a tourist destination."

How will the closings impact the metro area? "It's a wait-and-see," Consolo says. "They've already closed 34th Street, and they have one store on Union Square. They may go the way of the record stores, like when HMV and Virgin decided to take a Times Square store and close all their other Manhattan stores to consolidate."