As Toys ‘R’ Us Collapses, Walmart Massive Toy Business Thrives

March 11, 2018 by Douglas A. McIntyre

There has been a great deal of speculation about which retailers will benefit from the likely collapse of the Toys “R” Us domestic operation. At or near the top of the list,  Walmart (NASDAQ: WMT) has toy sections across thousands of stores and a huge online section as well.

Walmart would benefit from a disaster at almost any other large retail business. It has over 3,500 Supercenters in the U.S. which are the company’s flagship locations. These stores employ over one million people nationwide. Walmart US had sales of $315 billion last year.

A walk through a Walmart shows that in some locations it has aisle after aisle of toys. Its merchandise experts pick the best selling toys. Toys “R” Us had to have an extremely broad inventory to stay competitive. The cost of the inventory ties up capital. Walmart does not have that problem

Toys “R” Us had a very modest online presence, which is trouble for any mid-sized national retailer. None can match the massive traffic to either Walmart’s website, or its primary competition (NASDAQ: AMZN) which also has an almost endless toy collection.

Presumably, Walmart can also afford to offer sharp discounts, or “every day low prices” to sell toys. It can carry low margins, or even loss leaders because of its cash flow and balance sheet. For Toys “R” Us, those options are no longer options at all.

Toys “R” Us has about 800 stores in the U.S. It has already announced it will shutter 200. Some set of large retailers will take all the foot traffic which survives the end of the dying toy retailer

One sad bit of history about Toys “R” Us is that its corporate site shows it won a spot on Fortune’s “World’s Most Admired Companies” list. But the award is from 2012.  In the retail industry, that is centuries ago. Walmart is still on that list today, a sign, among other things, of how many retail disasters have occurred around it, and the extent to which is has benefited from many.