Toys 'R' Us Faces Supplier Hesitation Amid Aggressive Expansion Plans

Toys "R" Us is planning a significant expansion, aiming to open 120 new stores by Thanksgiving. However, the retailer's new operators are encountering skittishness from suppliers who were negatively impacted by the company's devastating bankruptcy in 2017. Go Retail Group, the Texas-based operator, has opened 40 year-round Toys "R" Us stores since 2024 under a license from WHP Global, which owns the brand.

As Go Retail seeks to more than quadruple its store count for the crucial holiday season, it has requested extended credit terms from toy manufacturers, asking for payment up to 180 days after goods are delivered. This request has met resistance, as industry norms for inventory financing typically range from 30 to 90 days.

"They should be the ones financing the business, not their vendors," said Jay Foreman, chief executive of Basic Fun, maker of Tonka Trucks and Care Bears, recalling the negative experience of the previous bankruptcy. Alan Dorfman of Super Impulse, a maker of miniature toys, echoed these concerns, noting past "bumps in the road" with Go Retail and expressing a desire to get dealings back on track.

The original Toys "R" Us, founded 70 years ago, operated over 800 stores in the U.S. before liquidating in 2018. The company was burdened by $5 billion in debt after its acquisition by private equity firms in 2005, leading to significant losses and disruption across the toy supply chain.

WHP Global acquired the brand in 2021 and has since pursued a strategy of partnerships, including with Macy's and Go Retail. The brand also has international licensing agreements for approximately 1,680 stores across 37 countries. Jamie Uitdenhowen, formerly Toys "R" Us's vice president of merchandising, has returned as executive vice president of the brand, and Matthew Finigan, the pre-bankruptcy treasurer, now serves as chief financial officer.

Go Retail CEO Gideon Schlessinger stated that the company works to secure favorable terms with suppliers and that its purchasing and payment arrangements have remained consistent. He also asserted that the strength and growth of the Toys "R" Us brand have enhanced supplier relationships, countering claims of hesitation.

The expansion occurs as the U.S. toy industry sees a resurgence, with sales growing 17% in the first half of the year, the largest increase in six years. Despite this market growth, some industry analysts question Toys "R" Us's relevance against established competitors like Walmart, Target, and Amazon, which have expanded their toy offerings.

Toy analyst Gerrick Johnson of Seaport Research noted the increased competition, stating, "It's a tougher landscape for them to come back to." The new Go Retail stores are significantly smaller, ranging from 3,500 to 7,000 square feet, compared to the original stores which were around 30,000 square feet.

Suppliers like Tom Neville of Connetix, makers of magnetic tiles, have expressed surprise at finding their products available online through Toys "R" Us without direct dealings, suggesting they are being sourced through distributors. He also noted issues with merchandising in the branded toy departments at Macy's.

Brian McDonald, vice president of sales and marketing for Simplay3, a maker of outdoor activity sets, indicated caution due to the financial losses his company experienced from the previous bankruptcy. However, he also acknowledged a "fear about missing out on an opportunity."