Macy’s announced today a partnership with WHP Global to bring back Toys“R”Us to American Shoppers. WHP earlier this year took controlling interest in Tru Kids Incorporated, the parent company of Toys“R”Us. In Macy’s earning call, Jeff Gennette, CEO and chairman of Macy’s, discussed how bringing the toy category back to Macy’s in a major way will further its mission to attract the Millennial mom. The partnership will allow Macy’s to have private branded toys from Toys“R”Us, provide a broad assortment of national branded toys to its shoppers and participate in co-marketing efforts like the inclusion of Toys“R”Us in the Macy’s Thanksgiving Day Parade. Gennette also mentioned the business will operate on decent margins contributing to a profitable model for the retailer.
The growth of the toy market
The toy business has grown exponentially over the past year during the pandemic lockdown and continues to be a draw for Macy’s shoppers. Nata Dvir, chief merchandising officer of Macy’s, said, “Toys“R”Us is a globally recognized leader in children’s toys and our partnership allows Macy’s to significantly expand our footprint in that category, while creating more occasions for customers to shop with us across their lifestyles.” Beginning today, Macy’s customers can experience the expansive assortment of Toys“R”Us products online exclusively at macys.com/toysrus
Toys“R”Us aligns with Macy’s Polaris strategy
Macy’s continues to look at smaller footprints and reductions in the number of large format department stores which have shrunk from 737 in 2015 to 572 in 2020. Additionally, Macy’s has 162 Blue Mercury and 55 Bloomingdale’s stores. The expansion of toy stores within Macy’s aligns with the Polaris strategy announced last year. Specifically, the partnership with Toys“R”Us will accelerate digital growth for Macy’s, provide a key category for its loyal customers, and deliver a new retail format for its target market.
Growth in the toy industry is a tailwind for Macy’s
The toy industry is expected to grow 4% from 2020 to 2025 according to research conducted by IBISWorld, coming off a 1.9% decline from 2015-2020. The toy market is highly competitive with major players like Amazon
Macy’s performance in the second-quarter
Macy’s performance for second quarter (Q2) included comparable sales up 5.9% versus 2019 and up 62.2% compared to 2020 when the pandemic prevented stores from operating at normal capacity. Categories that came back strongly in Q2 were denim, luggage, dresses and other occasion-based goods. Macy’s experienced a shift of customers from online shopping to in-store shopping in Q2 with digital sales declining 6% but still ahead of its 2019 business by 45%. The company brought approximately 5 million new customers into the Macy’s brand, a 30% increase compared to Q2 2019. Inventory was down 14.5% compared to 2019 levels but Gennette discussed Macy’s plans to keep inventory at a lower level and optimize its current inventory and profit margins by reducing couponing and also the frequency and depth of its promotions. Gennette said, “We can better understand and deliver best pricing using pricing science that will provide customers with pricing that meets their needs and create higher profitability for Macy’s.”
Loyalty program is key driver for Macy’s and its new partnership
Macy’s Star Reward program which has close to 30 million members accounted for 65% of total sales for the first half of 2021 and those customers frequent the store three times as much as non-participating members. The average amount spent by the loyalty member was up 15%.
Toys“R”Us at Macy’s is a win-win for both companies. Toys“R”Us can benefit from the strong branded position and deep shopper loyalty of Macy’s. The partnership provides Macy’s with an exceptional assortment of products in a category which otherwise is difficult for department stores to execute and will help Macy’s further its digital presence across a broader customer demographic. Both companies have strong marketing capabilities and brand recognition.