Tough toy business claims another casualty | David Nicklaus

Selling toys might sound fun, but it hasn’t been a lark for most retailers that have tried.

Toys R Us, which filed for bankruptcy this week, is the latest addition to a long list of toy-chain casualties. Zany Brainy failed in 2001, FAO Schwarz in 2003 and KB Toys in 2008.

Toys R Us insists that, unlike those defunct competitors, it will emerge from bankruptcy and continue to sell the delights of childhood. Whether it succeeds will be largely up to the makers of Barbie, FurReal Friends and other top-selling toys.

Those companies can’t be happy about having a major retailer default just as they’re gearing up for the holiday season. Among Toys R Us’ $7.9 billion in debt is $136 million owed to Mattel, $59 million to Hasbro and $32 million to Lego.

The suppliers may have to absorb millions of dollars in losses, but some are sounding optimistic notes.

Stephen Berman, chief executive of California toymaker Jakks Pacific, issued a statement warning shareholders about bad-debt charges but expressing hope “that we can resume our relationship with Toys R Us as one of its significant suppliers.”

The truth is, toymakers need Toys R Us almost as much as it needs them. Wal-Mart sells more toys, but it drives a hard bargain on price and stocks only the best-selling versions of a popular toy, not the profitable line extensions and deluxe editions.

Dan Lauer, the St. Louisan who created Waterbabies, says Toys R Us carries the complete line of his dolls, from the $7.99 Wee Waterbabies to the $29.99 Waterbabies Special Delivery. Walmart and Target give the dolls half as much shelf space, with less promotional signage.

“The industry needs a healthy Toys R Us,” Lauer said. “They have the luxury of aisle space to do in-store product demonstrations, and they carry a much wider line….

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