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Toys 'R' Us to return in Macy's stores as retailers prosper

·4-min read
Macy's unveiled a partnership with Toys "R" Us, saying it expects the chain to play a role in its annual Thanksgiving parade in New York

Macy's unveiled Thursday a plan to showcase Toys "R" Us merchandise, as the famed American department store became the latest retailer to report strong results on a comeback of in-store shopping.

Starting next year, consumers will be able to shop for toys at more than 400 Macy's nationwide through a store-within-a-store format, Macy's said in a joint press release with WHP Global, which controls the Toys "R" Us brand.

The toy brand known for its colorful Geoffrey the Giraffe mascot had fallen on hard times and struggled to survive as a stand-alone brick-and-mortar chain.

Shares of Macy's soared after the 160-year-old chain unveiled the toy venture and lifted its full-year forecast following a boost from shoppers returning to stores.

The results came amid a wave of generally strong earnings from retailers, including big-box chains Walmart and Target, off-price giant TJX and fellow department store Kohl's, with executives pointing to a comeback in sales at physical stores even as online growth ebbs.

Brick-and-mortar retailers, which were battered early in the pandemic, also appeared to get a boost from a report in The Wall Street Journal that Amazon plans to open several multipurpose shopping venues similar to department stores.

The stores will sell household items, electronics and apparel, showcasing Amazon's private-label merchandise, the newspaper said, citing people familiar with the matter.

Analysts pointed to a number of strategic reasons for Amazon's planned expansion into physical retail, including the desire to boost sales in clothing, home furnishings and other product lines and a recognition that the "future of retail is multichannel" rather than primarily online, GlobalData Retail's Neil Saunders said in a note.

An Amazon spokesperson said, "we do not comment on rumors and speculation."

- Store within a store -

Macy's toy announcement came in parallel to its release of second-quarter profits of $345 million, a sharp turnaround after posting a loss of $431 million in the same period of last year. The rebound came amid a 59 percent jump in sales to $5.6 billion.

Digital sales declined six percent compared to the year-ago period, but are up 45 percent compared with the same period of 2019.

Macy's Chief Executive Jeffrey Gennette described the customer as "increasingly omnichannel," sometimes visiting stores but buying later online after doing additional research.

"It used to be like five years ago you would have two touch points with a customer before they would consummate a transaction. It's now six," Gennette said.

Chains such as JC Penney and Macy's have closed dozens of outlets at US malls over the last few years, with the former company also shifting owners following a reorganization overseen by a bankruptcy court. Without those big anchor stores, many malls, too, have been in steady decline.

As pressure from Amazon and other online companies has forced them to shutter low-performing shops, department chains have tried to compete by unveiling more mini-stores for cosmetics and other goods.

Macy's views toys as a good "entry category" for millennial consumers who grew up with the toy brand and are now parents, Gennette said in a conference call with analysts, adding the company believes it can "quintuple the size of the (toy) business."

- Declining competition -

Toys "R" Us will also get good billing at Macy's annual Thanksgiving Day parade in New York.

The venture could be pivotal for the troubled toy brand, which was acquired by WHP earlier this year following the chain's 2018 bankruptcy that shuttered all of its more than 700 stores across the United States.

Macy's lifted its sales and profit forecast for this year, pointing to a boost from some five million new customers who have begun shopping at the chain during the pandemic.

The company's executives said they are under less pressure from off-price retailers, who also face increased costs due to higher wages and shipping expenses.

TJX, which owns discount chains such as TJ Maxx and Marshall's, has seen "less promotion" generally in the sector and plans to hike prices "surgically and selectively in certain areas of the store," said Chief Executive Ernie Herrman.

Shares of Macy's surged to close nearly 20 percent higher at $21.61.

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