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Reborn Babies R Us Plans National Store Growth

Retailer Eyes $1 Billion in Market Share From Liquidating Rival Buy Buy Baby
Babies R Us will officially open its U.S. flagship at the American Dream megamall on Wednesday. (Linda Moss/CoStar)
Babies R Us will officially open its U.S. flagship at the American Dream megamall on Wednesday. (Linda Moss/CoStar)
CoStar News
July 18, 2023 | 10:06 P.M.

Babies R Us, fresh from opening its only U.S. store, plans to push ahead with a national rollout that follows the model its sister retailer, Toys R Us, has used to expand.

The specialty baby-goods seller is slated to debut a 10,000-square-foot flagship — including a track to test strollers — at the American Dream megamall in East Rutherford, New Jersey, on Wednesday. That will be the first domestic Babies R Us store open and operating in the United States since the chain’s former parent, Toys R Us under its previous ownership structure, liquidated in 2018.

Babies R Us already has plans to expand its physical footprint, Yehuda Shmidman, CEO of WHP Global, told CoStar News on Tuesday during a preview of the new store. And with Buy Buy Baby going dark, that’s about $1 billion of market share “up for grabs,” according to Shmidman.

His New York-based company owns both the Babies R Us and Toys R Us brands. The toy retailer’s only dedicated U.S. flagship store is also at American Dream, and Toys R Us shop-in-shops have now opened in hundreds of Macy’s department stores. That formula will be repeated.

Shoppers can test drive strollers at a track, which has different types of surfaces, at the Babies R Us store. (Linda Moss/CoStar)

“In terms of what we did with Toys R Us, we started with our flagship here and we opened up 452 Toys R Us stores inside Macy’s across the United States, fully today operational,” Shmidman said. “We will replicate the strategy for Babies R Us, where a global flagship at American Dream will be the site for the one, and then stay tuned for a partner to be announced for a rollout nationally.”

He added, “Certainly before the end of the year we’d like to come out with our game plan.”

Smaller Footprint

The Babies R Us store is a fraction of the size of the original stores, which were typically 30,000 to 40,000 square feet, with warehouse-style “products floor to ceiling,” Shmidman said. The new brick-and-mortar location also differs in that it has a variety of offerings that let shoppers interact with and “experience” products such as strollers and car seats, take classes at an Education Center, sign up for a registry, consult designers to decorate and furnish nurseries, and even hang a tag on a wish tree with good thoughts for an infant.

“What Babies R Us does is it comes at the perfect moment, perfectly positioned to give that unique experience and one-stop shop, trusted shop, for baby goods,” Shmidman said.

Babies R Us’s rebirth is coinciding with the demise of both Bed Bath & Beyond and its baby-goods retailer, Buy Buy Baby, in a bankruptcy liquidation. Retail analysts have warned that Babies R U will still have plenty of competition, from companies such as Walmart and Target. Shmidman conceded that Babies R Us has rivals, but was upbeat about its prospects.

“We’re in the perfect position,” he said. “With the demise of Buy Buy Baby there’s about a billion dollars of market share up for grabs. That’s the way we quantify it. The reality is Babies R Us … becomes the single only trusted destinations for all things baby. So we do have formidable competitors. … They are fantastic companies. They’re generalists. They sell everything. They do a great job at that. If you want sort of one or two items, it’s perfect. And if you know exactly what you want, it’s perfect. If you want to browse, go through the journey, talk to experts, build your registry, sit down and take the time, you want to test out a stroller, that can only be done here.”

There are over 100 Babies R Us stores operating outside of the United States and a total of more than 1,400 Toys R Us and Babies R Us stores globally, Shmidman said.

The Toys R Us U.S. flagship, which opened in December 2021, has performed well, according to both Shmidman and Adi Adair, American Dream’s chief financial officer.

“That store has been a home run for us,” Shmidman said. “And this mall, the American Dream mall, in our opinion is the single best destination for families in the United States. It has everything. So of course, opening a Babies R us here, no-brainer, next to our Toys R Us flagship.”

Augmenting Family Experience

Adair agreed that Babies R Us is also a good fit for the entertainment-and-shopping complex.

“American Dream is all about the family experience, and this adds another level of experience for families, which is missing,” she said. “And it’s missing from our communities now with Buy Buy Baby closing. So I feel this just another layer of uniqueness that you’re not going to get at any other center right now in the U.S.”

American Dream, owed and operated by Canadian developer Triple Five, will be operating the Babies R Us store. It runs several attractions at the complex, including its indoor Nickelodeon Universe Theme Park and indoor DreamWorks Water Park.

In 2021, a year after the peak of the pandemic, American Dream posted revenue of $173 million and a loss of $59.4 million, according to public documents. In the first quarter this year it had gross sales of $116.3 million, compared with $120.9 million in the fourth quarter last year, according to filings.

With the rise of online shopping, some retailers have been rolling out smaller-format stores in some areas. Not as much merchandise is being held on-site at some shops.

“I feel retail in general obviously has taken an interesting turn of events,” Adair said. “The bricks-and-mortar is shrinking.”

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