TRU, Albertsons launch Toy Box: 1,000 combo stores to offer branded toy departments - Toys "R" Us

DSN Retailing Today, June 23, 2003 by Doug Desjardins

NEW YORK -- In the toy retailing sector's ongoing quest to find new, innovative means to drive revenue, Toys "R" Us is looking for a little help from supermarket giant Albertsons. The toy retailer signed a deal this month to open more than 1,000 Toy Box stores in Albertsons food and drug outlets during the next 12 months.

The announcement came after a six-month Toy Box pilot Toys "R" Us conducted at Albertsons stores in Chicago. Those results were apparently good enough to convince the retailer the concept would work on a larger scale.

"We've had an excellent relationship with Albertsons since we first began testing this concept with them last November in Chicago," Toys "R" Us ceo John Eyler stated in a prepared release. "And we see the expansion of this relationship building on that early success."

The multiyear deal, for which terms were not disclosed, will make Toy "R" Us the exclusive toy provider for the 2,300-store Albertsons chain and give the company a new vehicle to drive sales. The stores-within-stores will vary in size and feature branded and non-branded product generally priced under $25. The two-phase rollout will begin this summer with a target completion date set for mid-2004. Current plans call for approximately 1,000 locations to be open by next summer.

Analysts view the partnership as a good move for two retailers battling for market share in tough environments. "It's a win-win for Toys "R" Us and for Albertsons," said George Whalin of Retail Management Consultants.

One problem both retailers have in common is Wal-Mart. Toys "R" Us has watched toy buyers migrate to Wal-Mart and Albertsons has lost food business in markets where Wal-Mart supercenters have opened. "They [Albertsons] are losing part of the food market to supercenters so they're looking for ways to generate more volume," said Whalin.

More importantly, it gives Toys "R" Us a new venue where customers go 365 days a year instead of the two or three months during the holidays. "No retailer in the world gets the traffic that supermarkets get," said Whalin. "And there's lots of impulse buys in supermarkets and lots of kids, so it's a great idea."

Toys "R" Us has struggled the past six months following lackluster sales during the holidays. In its first quarter ended May 3, it reported a loss of $7 million. Albertsons is coming off two years of restructuring and faces intense competition from mass merchants and other grocers. It's expecting healthy profits this year, but recently reduced its earnings forecast for 2003 by about 30 cents per share.

The Toys "R" Us deal with Albertsons is not the first collaborative, out-of-the-box arrangement in the industry. Not only does TRU have a similar arrangement with Ahold USA's Stop &. Shop division, but fellow toy retailer K*B Toys has led the sector in these types of joint ventures, and currently has a branded, seasonal store-within-a-store at Sears, and supplies toy merchandise on a select basis for CVS drug stores and Safeway supermarkets.