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NEW YORK CITY- Lego Systems, the Denmark-based company that makes the famous plastic building bricks, is slowly opening stores in U.S. malls, during a period when the toy sector of retail is taking a hit.

Lego will complete this year’s rollout of eight units next week when it opens at the Taubman Centers-managed Stoneridge in Pleasanton, CA, in the Bay Area. That opening will bring the chain’s total to 23.Next year Lego plans to open 10 stores. The company has not released further expansion plans and has grown slowly since opening its first unit in 1992 in the Mall of America in Bloomington, MN.

Even slow growth outpaces other toy retailers in the current environment. The chain is expanding when toy retailers have faced financial problems due to competition from such discounters as Wal-Mart and Target. Toys “R” Us said earlier this year that it would consider selling its 1,400-unit global toy business to concentrate on the company’s 200 Babys “R” Us stores. In January the company closed its 146 Kids “R” Us and 36 Imaginarium stores.

Meanwhile, mall-based chain KB Toys filed for bankruptcy protection at the beginning of the year and closed just over 350 stores, leaving it with around 750. And FAO Inc., the former owner of the famed FAO Schwarz chain, closed 13 of its stores last year, leaving it with two units, in Las Vegas and New York City. (FAO also liquidated its 89-unit Zany Brainy concept and sold its 34 Right Start stores.)

Lego hopes to avoid such a fate with its concept by growing slowly, says the company’s retail division spokeswoman. “We’re not looking to have 200 stores,” she says. “You don’t want to grow too fast because there are risks with that. So we want to have very calculated growth.”

Right now that growth is in malls, and many of them upscale. This year the company opened stores in Bellevue (WA) Square; Tysons Corner Center in McLean, VA; and Westfield Shoppingtown Valley Fair in Santa Clara, CA, among others. Lego also operates four outlet stores, as well as units in the Anaheim, CA, and Orlando, Disney theme parks.

So it doesn’t compete with the many chains, such as Target Corp., that sell Lego products, the company has differentiated its stores by making them destinations for big fans of the colored bricks, the spokeswoman says. The stores, which range in size from 750 sf to 2,000 sf, sell items that, the company claims, customers can’t purchase at other chains, such as large train sets and other collectibles. They also have a section called “Pick-A-Brick,” where shoppers can fill up a container with various Lego pieces for $9.99. “You’re appealing to a more serious collector,” Carter says.

The stores could be a good way for Lego to compete with cheaper competitors such as Mega Bloks, which sells interchangeable products, says Chris Byrne, a New York-based toy consultant. (Lego no longer has the patent on the design of its bricks.)

The stores “give them an opportunity to showcase their brand and put it in front of affluent people who aren’t shopping on price,” he says. “In this market it’s a little bit daring, but these are nice place for kids, and it really gets them involved in the brand.” Byrne says the biggest challenge the company faces is to ensure the stores can profit in high-end malls.

Lego is doing well so far at Bellevue Square, says Jennifer Leavitt, vice president of marketing at the center, where the company opened a unit in late July. “We’ve been very excited to have them because we don’t have a true toy store in our tenant mix,” she says of the 1.3-million-sf mall, where FAO Schwarz closed last year and a Wizards of the Coast gaming unit shuttered earlier this year.

The folks at Bellevue Square, the only center to house multiple retailers in the Seattle area, likes that Lego is not looking to expand rapidly, Leavitt says. “Not only does it fulfill a category we’ve seen a decrease in over the last couple of years, but it’s also a one-of-a-kind in the area,” she says.

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