Toys for Tots

Profits from playthings

American toysellers spent most of the Christmas season last year in the doldrums. Profits plunged when sales of highly touted hand-held electronic games, which had been a smash success the year before, fizzled. But Toys R Us, the largest retailer of playthings in the nation, which monitors its check-out counters with computerized cash registers, by fall had spotted the public’s disenchantment with such items and quickly switched marketing tactics. The company cleared the games from its shelves by slashing prices, then stocked up on the better-selling items, including Barbie dolls, Tonka trucks and footballs. The result: Toys R Us had its best year ever, while many of its competitors did poorly.

That kind of action explains how the Rochelle Park, N. J.-based Toys R Us has become the dominant seller in the U.S. of games, dolls, bikes and other products for children. An estimated one out of every twelve toys sold this year will have been bought at a Toys R Us store. Says one industry analyst: “Toys R Us is by far the leader in almost all aspects of the business. Most of their competition isn’t close to them.”

The firm has prospered by building the supermarkets of toys. Each of its 120 outlets looks exactly like every other and carries the same 18,000 discount-priced items. The company’s stores and its tall, distinctive signs are always set directly alongside well-traveled highways, near shopping centers or malls. Customers entering the stores are apt to be staggered by the biggest display of toys outside the North Pole: 138 different bicycle models, for example, and 160 dolls displayed in five 12-ft.-high cases.

Toys R Us is the creation of Charles Lazarus, 58, who has been selling children’s wares since 1948. Lazarus began with a kiddy furniture store in Washington, D.C., that he called National Baby Shop. He changed the name to Children’s Super-mart in 1954, and reversed the three Rs on the sign and company stationery to attract attention. Says he: “We used the backward R because it made the name distinctive. Everybody remembered it.” Customers used to come into the store regularly and tell the manager that letters on the sign out front were backward.

The first store to bear the new Toys R Us name was in Rockville, Md., where the letters on the old sign were too small to be seen from the highway. Local laws kept Lazarus from building a bigger sign, so the solution was to have the new name.

Lazarus sold his four Toys R Us outlets to Interstate Stores in 1966 for $7.5 million in cash, and he took over management of Interstate’s toy operation. The company was overextended, though, and it went bankrupt in 1974. Yet Toys R Us stores flourished even while Interstate was going through bankruptcy, and it emerged from the court-ordered reorganization in 1978 as the surviving company. The firm’s sales have nearly doubled since then to reach $597 million in the fiscal year ending last Feb. 1 , with profits coming to $28.9 million. Lazarus has opened 20 new stores this year, and expects to add 22 to 24 in 1982 and “several hundred” during the decade.

So far this Christmas, there have been no surprises on sales. Computer video games like the Atari (price: $139.84) are the top sellers at Toys R Us, and items based on films and television series like Raiders of the Lost Ark and The Dukes of Hazzard are also trading briskly. This year’s video playthings have bigger displays and are more sophisticated than the hand-held electronic games that sold poorly last Christmas. Says Lazarus: “People are interested in what is new this year. Anything that requires a lot of imagination is selling. People don’t want something boring.”

Lazarus is married to Helen Singer Kaplan, 52, a well-known psychiatrist who runs one of the leading U.S. sex-therapy programs. The marriage is the second for both, who have a total of five children from previous marriages. Says she wryly: “Our kids call us the Toy King and the Sex Queen. Between toys and sex, we have all the pleasure parts covered.” ·