Boom days, when toy stores like this one in New York were filled with customers. Picture: BLOOMBERG
Boom days, when toy stores like this one in New York were filled with customers. Picture: BLOOMBERG

New York — The demise of Toys ‘R’ Us in the US has left billions of dollars in sales up for grabs and Party City is going after that gaping hole.

Party City plans to operate 50 pop-up toy stores from September, possibly in former locations of the defunct chain, executives say. The assortment will include top brands from Hasbro and Mattel and plenty of Santa suits and stockings for Christmas.

Party City is adding more toys to its website as part of a push into the category. If the pop-up pilot goes well, the company could expand the format in 2019.

"There have been years and years of a stand-alone toy store that is now gone," said Ryan Vero, Party City’s retail president. "Customers are going to be looking for something to fill that void, and we intend to do that."

One of the big questions since Toys ‘R’ Us began liquidating its US business earlier in 2018 was which retailers would go after its customers. So far there have been few signs that other major outlets for toys, such as Walmart or Target, are expanding offerings.

Accelerated plans

Party City considered the strategy for several years and accelerated plans with the struggles of the last national toy chain, whose jingle "I don’t want to grow up, I’m a Toys ‘R’ Us Kid" became part of the American lexicon in the 1980s. The long-time industry leader not only faced increasing competition from Walmart and Amazon but was buried under $5bn in debt from a 2005 leveraged buyout.

In addition to its 900 stores, including franchises in the US and Canada, Party City has been running temporary Halloween City locations for a decade. In 2017, 250 pop-ups generated $54m of the company’s $2.37bn in total sales. Shares of Party City climbed 14% in 2018 until Friday’s close, outpacing the 3% gain in the S&P 500 index.

The Halloween pop-ups made testing what it is calling "Toy City" easier because the company already hires seasonal workers and leases locations. The Halloween concept often gets placed in former mega-stores and at about 900m² it does not use all the space. So under the same roof, there was room to add 450m² of toys and Christmas gear.

Executives also predict they will have an easier time hiring temporary workers because they can now offer work from mid-August to early January, instead of ending just after Halloween. It will also give them an advantage in leasing better locations because landlords are looking for a toy presence to replace Toys ‘R’ Us, says chief financial officer Dan Sullivan.

"For the landlord, it’s a toy store in the centre for the fourth quarter," Sullivan said. "There’s not much more attractive than that."