By adding play areas and more interactive technology for kids, Toys R Us hopes to coax parents into doing more shopping at its stores and help it better compete against Wal-Mart and Amazon.
NEW YORK — After years of losing ground to online rivals and discount chains, Toys R Us plans to revamp its stores to be places where kids come to play.
The company, which was taken private almost a decade ago by Bain Capital Partners, KKR and Vornado Realty Trust, will open a prototype store this year, CEO Antonio Urcelay said Tuesday. The goal is to make all its locations more engaging for children than Wal-Mart Stores or Target, he said in an interview.
The company will add more technology for kids to use, and additional floor space will be devoted to play areas. That in turn may coax parents to do more shopping at Toys R Us. It also will reduce the need to compete on price in an increasingly cutthroat toy industry.
“It has to be something where kids want to go and play,” said Urcelay, who was promoted to CEO in October 2013 after running the company’s European division. “We have to reinforce that we are a specialist.”
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For years, Toys R Us has been hurt by Wal-Mart and Amazon.com undercutting it on price. Urcelay has reduced the amount of discounting, though the chain does offer price matching and works to keep the best-selling toys in stock.
The approach is beginning to pay off, he said. Even though sales fell in the fourth quarter, gross margin improved.
“Our strategy is to look for profitability, not just sales growth at any cost,” he said.
Urcelay predicts his turnaround will take one to two more years. Previous attempts at a comeback have faltered, making it difficult for the chain’s private-equity backers to see a return on their investment.
The company canceled an initial public offering in 2013 after results worsened. It replaced Jerry Storch as CEO that year.
Urcelay said his team is focused on improving business, not when or how the owners can exit their investment.
In Urcelay’s first year, the retailer focused on improving its U.S. stores by speeding up checkout lines, cleaning locations more often, adding signs and brightening the lights. While same-store sales still fell 1 percent last year, that was better than the 5 percent drop in 2013.
Those enhancements will expand to more sites this year, said Hank Mullany, president of U.S. stores. The company also will roll out mobile devices to staff, letting employees offer more product information and expertise to customers — another attempt to stand out from Wal-Mart and Target.
The Babies R Us chain, meanwhile, will add more workers to boost customer service, which the company acknowledged had been lacking.
While Toys R Us tries to stabilize its physical stores, it expects e-commerce to be its long-term growth engine. Online sales rose 6.8 percent to $1.23 billion last year, compared with a 1.5 percent drop to $12.4 billion for total revenue.