Toys R Us' liquidation also affects Babies R Us

Customers have only 30 days to use gift cards, report says

NEW YORK – The likely liquidation of Toys R Us, the nation's largest independent toy seller, could add stress for the companies that make toys and games, and mean changes for the owners of the strip malls where most of its stores are.

Not to mention its impact on more than 30,000 Toys R Us workers in the U.S. There are two stores in the Jacksonville area, which means more than 100 people could lose their jobs locally.

Customers should also be aware that they have only 30 days to use gift cards at the stores, according to a report from USA Today.

The impending store closures also include all Babies R Us stores. 

The stores won't be closing right away, but when they will shut their doors is unclear, so those with registries at Babies R Us are encouraged to open a registry at another store like Target, Walmart or Buy Buy Baby.

According to a report from The Record in Bergen County, N.J., the websites, including Babies R Us registries, will stay up and operating for now in the hopes that someone will buy them.

An investor is looking to buy out Toys R Us and keep about 200 stores open, but the store's media and marketing representatives don't have any additional info right now.

Here's a look at the impacts of the big-box store's liquidation:

What happens to toy makers?

Toy companies, both big and small, will lose a place to test new toys. Toys R Us was a launchpad for emerging trends and toys, such as ZhuZhu Pets, which were the must-have holiday toy in 2008.

"Toys R Us was known as an incubator," said Jim Silver, editor-in-chief of toy review site TTPM.com.

The toy makers will also have to find new places to sell their goods. The bigger toy makers -- Hasbro and Mattel -- will likely hurt at first, but then find their footing at Walmart, Target and Amazon, says Richard Gottlieb, a consultant at Global Toy Experts.

Toys R Us accounts for about 11 percent of Mattel's annual sales and about 9 percent of Hasbro's annual volume, analysts estimate. Both have posted lackluster financial results of late, and there was talk last year about the possibility of a merger between them.

Toys R Us through the years

Toys R Us, which said it would close or sell all its 740 stores in the United States, traces its origins back 70 years to a single baby furniture store. Here's a look at Toys R Us through the years:

  • 1948: Toys R Us founder Charles Lazarus opens Children's Bargain Town, a baby furniture store, in Washington, D.C.
  • 1957: First Toys R Us store is opened.
  • 1965: Geoffrey the giraffe becomes the company's mascot. He appears in his first TV ad in 1973. The company sells stuffed animals, Lego sets and figurines in Geoffrey's likeness.
  • 1978: Toys R Us becomes a public company.
  • 1983: Kids R Us opens, selling children's clothing. It had a 20-year run before all 146 stores were closed in 2003.
  • 1996: Babies R Us is born, selling diapers, cribs and car seats. There were more than 200 Babies R Us stores as of last year.
  • 1998: The ToysRUs.com website is launched.
  • 2005: The company is bought by three private equity firms and taken private.
  • 2007: Toys R Us buys well-known New York toy store FAO Schwarz. It closes the store in 2015 and sells the brand a year later.
  • 2015: Toys R Us closes its flagship store in New York's Times Square, which had a 60-foot Ferris wheel, after 14 years.
  • 2017: Toys R Us files for Chapter 11 bankruptcy protection.
  • 2018: Toys R Us, following poor holiday sales, files a plan to close or sell its 740 stores in the U.S.

Source: Associated Press

But smaller toy companies will have a harder time. Silver believes they will be hurt more than Mattel Inc. and Hasbro Inc. since Toys R Us could account for up to 40 percent of their overall business. And big stores, such as Walmart and Target, are less likely to sell smaller brands because they have less space to sell toys. Stephanie Wissink, a toy analyst at Jefferies, wrote in a recent note that small companies will explore selling themselves to survive. She thinks that Hasbro and Mattel will be best positioned to add more small- to medium-sized toy makers to their portfolios.

What happens to the real estate?

Real estate executives offer different opinions on whether landlords can easily fill the holes at the strip centers where most of the Toys R Us locations are.

Given the chain's issues, the closings aren't a shock to landlords, and they've already been trying to line up possible tenants to replace Toys R Us over the past few months, said Katy Welsh, a senior vice president at the southern Florida division of the commercial real estate brokerage firm Colliers International.

Welsh says she's been working with a number of companies like Glowzone, an entertainment park, and Lucky Markets, which offers beer tastings in its stores, which would be interested in taking some of the spaces nationwide.

"You have to look at this as an opportunity to reposition that store," she said.

But Suzanne Mulvee, director of research for CoStar, a real estate research firm, says that 51 percent, or 450 Toys R Us's stores are in shopping centers considered low-quality. So landlords could struggle to replace them with tenants at similar rates - or worse, they could remain vacant, she says. She says she also believes that matching the size of the box, which average about 30,000 square feet, could be difficult as well.

"The sweet spot seems to be boxes that are under 25,000 square feet, " she says.

What happens to the brand?

Toys R Us, as a well-known and long-lasting brand, may yet have a future - the company even quoted its classic jingle in its bankruptcy filings. And other seemingly dead retailers have a way of coming back to life.

American Apparel, which closed all its stores last year after filing for bankruptcy, was revived by another company as an online-only clothing store. FAO Schwarz, which Toys R Us once owned, is opening shops inside department stores in the U.S. and China. And Sharper Image, which also shut its stores, now sells gadgets online and opened a New York pop-up shop during the holidays last year.