Walmart Inc. doesn't seem worried that the reentry of Toys "R" Us into the U.S. market will cut into its toy sales. Analysts are in agreement.
Macy's Inc. said last week that Toys "R" Us will open shops inside more than 400 Macy's department stores next year. Shoppers can already buy Toys "R" Us merchandise online through Macy's website, the department store chain said in an Aug. 19 news release.
Toys "R" Us filed for Chapter 11 bankruptcy reorganization in 2017 and closed its U.S. stores in a 2018 liquidation. The iconic toy retailer still operates stores in Canada and a few other countries, and its e-commerce business serves more than 25 countries, Macy's said. Globally, Toys "R" Us generates more than $2 billion in sales, the company said.
"Our partnership with Macy's marks the greatly anticipated return of Toys "R" Us in the U.S.A., and changes the retail landscape by combining two beloved retail brands together for consumers across the nation in a completely innovative way," said Yehuda Shmidman, chief executive officer of Toys "R" Us parent company WHP Global.
But Walmart said in a statement that it's not making any changes related to Toys "R" Us' return to the U.S. market.
"Walmart is America's best toy shop, and we are preparing for the upcoming holiday season just like we would any other," Walmart spokeswoman Leigh Stidham said. "We're excited to surprise and delight our customers with the hottest toys of the season at our everyday low prices and look forward to sharing more soon."
The U.S. toy industry market is worth $32.6 billion, according to The NPD Group/Consumer Tracking Service. And retail analysts say Toys "R" Us at Macy's has little chance of nabbing any of Walmart's share in that market.
Steve Dennis, president and founder of SageBerry Consulting LLC, said it's possible that Toys "R" Us at Macy's could have an impact on Walmart, "but it's hard to see that it will be a big deal."
"Walmart has way more locations, way more traffic" in-store and online, and perhaps a stronger offering -- "though I suppose that remains to be seen," Dennis said.
Keith Anderson, senior vice president of strategy and insight for e-commerce analytics firm Profitero, put it even more bluntly.
"In terms of a resurrected Toys "R" Us impacting Walmart's sales, I think the answer is a resounding no," Anderson said. "Awareness and interest in Toys "R" Us is very low, and it takes a long time to build back awareness, interest and trust."
And to Sucharita Kodali, a Forrester Research vice president and principal analyst who worked at Toys "R" Us years ago, "to say that Toys "R" Us has had or will have a 'resurgence' is a joke."
"It was barely delivering anything meaningful in its last days and the various attempts such as small-format stores and what-not aren't really anything to talk about," Kodali said. "Why Macy's would even need Toys "R" Us is baffling, unless there is an investor group buying the inventory and it's a store-in-store that requires nothing from Macy's other than handing over space."
"There is no merchandise that Macy's couldn't source on its own in the toy industry," Kodali said.
A highly successful company for 70 years, Toys "R" Us began to tank in the U.S. as Amazon dominated online shopping and Walmart and Target Corp. ramped up their e-commerce businesses, industry analysts said at the time. Toys "R" Us was not positioned to compete in that sphere, they said.
And Toys "R" Us said in its liquidation filing that Walmart, Target and Amazon put the nail in the coffin by cutting prices on toys during the 2017 Christmas shopping season. Toys "R" Us couldn't match those prices, the company said in the filing.
The once highly profitable company ended up carrying a huge debt load.
In the big picture, though, Kodali said the toy industry has been struggling for years.
"Children spend more time on digital devices and using streaming media more than ever," she said. Except for a few brands like Lego, Kodali said, the toy space is a tough space to be in.
"Toys "R" Us never successfully reinvented itself" to serve the interests of children today, Kodali said.
When Toys "R" Us closed its U.S. stores, Walmart, along with Target, Amazon, Party City and other retailers, quickly expanded their toy assortments and marketing, according to industry trade group The Toy Association Inc.
Dennis said he hasn't seen any data quantifying the impact of Toys "R" Us closing, but "clearly all that business had to go somewhere."
"Given Walmart, Target and Amazon's big commitment to those categories, they had to gain relative share" of the toy market, Dennis said.