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Toys R Us to Set Up Shop in Albertson's

The retailers are seeking to recapture market share from Wal-Mart, the top seller of toys and groceries.

June 04, 2003|From Reuters

Toys R Us Inc. and Albertson's Inc. on Tuesday set a play date they hope will win back shoppers who buy their toys and snacks at Wal-Mart Stores Inc., the world's largest retailer.

The No. 2 toy seller, Toys R Us, will set up its Toy Box toy shops in many of the 2,300 food and drugstores owned by No. 2 grocer Albertson's, the companies said Tuesday. Toys R Us also will install unbranded toy departments in some Albertson's stores.

The retailers want to recapture market share from Wal-Mart, which has grown into the top seller of toys and groceries after expanding about 15 years ago to supercenters from discount stores for general merchandise.

Financial terms of the multiyear deal were not disclosed.

"It's great for Toys R Us," said Jim Silver, publisher of Toy Wishes magazine. "Their biggest dilemma is how to attract traffic 52 weeks a year, and now they're doing a deal with a major supermarket chain that attracts business 365 days a year."

Wal-Mart can expand its toy department during the busy holiday shopping season, slashing prices on toys to lure shoppers in and then making up the profit with sales of other merchandise. In the grocery department, Wal-Mart's efficient food distribution system allows it to offer lower prices.

Toys R Us, which has been forced to offer heavy discounts to fight competition, last month reported a wider loss in its fiscal fourth quarter. In January, the company cut 700 management and supervisory jobs after disappointing holiday sales.

Toy retailers do most of their business in the fourth quarter, when consumers buy gifts for the holidays, but struggle the rest of the year.

The Toy Box stores, which Toys R Us began testing in 2001, are typically a store aisle of 200 to 500 square feet and offer toys selling for $25 and less.

Toys R Us will roll out the store-within-a-store concept in two phases, beginning this year in about half of Albertson's stores and completing the rollout by mid-2004.

Shares of Paramus, N.J.-based Toys R Us fell 18 cents to $11.86. Shares of Boise, Idaho-based Albertson's rose 14 cents to $21.40.

Both trade on the New York Stock Exchange.

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