Toys 'R' Us making comeback with 2 stores in New Jersey, Texas

NEW YORK -- The first two new Toys R Us stores - one in Texas, the other in New Jersey - will open in November as part of a small comeback of the defunct iconic toy chain in the U.S.

Richard Barry, a former Toys R Us executive and now CEO of the new company called Tru Kids Brands, says an online experience will follow. He says brand partners and more details will be announced in coming weeks.

Tru Kids Brands said it has entered a partnership with a startup called b8ta, an experiential retailer to launch what Barry calls an interactive store experience based on a consignment model. Toymakers will pay for space in the stores but will get all the sales. The tech company will also offer brands access to data that will track traffic patterns and other metrics.

Plans are to open a Toys R Us store in The Galleria mall in Houston, and in Westfield Garden State Plaza in Paramus, New Jersey. The first two locations will be about 6,500 square feet - a fraction of the brand's former big box stores. Barry noted stores opening later will be about 10,000 square feet.

Barry and several other former Toys R Us executives founded Tru Kids in January and are now managing the Toys R Us, Babies R Us and Geoffrey brands. Toys R Us generated $3 billion in global retail sales in 2018. Barry says a sizeable business is still up for grabs despite many retailers like Walmart and Target expanding their toy aisles.

The key issue, however, is how much support the new model will get from suppliers, who were burned by Toys R Us' quick demise and may not want to take another chance. Toys R Us, buckling under pressure from Amazon and several billions of dollars of debt, liquidated its business in the U.S. as well as other regions months after filing for Chapter 11 reorganization in the fall of 2017. That left suppliers with millions of dollars in unpaid bills. Vendors recovered only about 20 cents on the dollar.

Isaac Larian, CEO of privately held MGA Entertainment, the maker of the highly popular L.O.L. Surprise toys, said there's a need for another independent toy chain, but he decided not to be a brand partner because he believes the consignment model is too risky for suppliers, particularly with the issue of returns. He says his factors, which make cash advances to suppliers based on the goods they sell to the merchant, also wouldn't approve it.

"I like the interactive concept, but I just don't think the consignment model is going to work," said Larian, who along with several other investors, abandoned a bid last year to buy Toys R Us.

Tru Kids Brands also says it wants to prioritize hiring former employees of Toys R Us, also burned by the demise of the iconic chain, though the company declined to specify the number of jobs it's looking to fill. A worker advocacy group called United For Respect says it has established a process where appointed employees will meet semi-annually with the new joint venture of the corporate board of directors and top executives to collaborate on workforce-related issues.

Tru Kids, based in Parsippany, New Jersey, is working with licensing partners to open about 70 stores this year in Asia, India and Europe. Outside the U.S., Toys R Us continues to operate about 800 stores.

"We think that this is going to be scalable, and we think we can grow the business over time," said Barry.