Analysts Say “Target” to Benefit the Most After Closure of Toys R Us Stores

Photo by Laura Northrup from Flickr

As the fans of Toys R Us reel from the news of the collapse of the toy retailer this month, other retailers are seeking the opportunity to cash in.

Walmart, Target, and Amazon have all been identified as the retailers who are poised to benefit from the closure of the stores of Toys R Us. However, in a note to investors that was released on Wednesday, analysts from Credit Suisse made a case for why Target could likely be the front-runner.

According to the research of the company, 90 percent of the stores of Toys R Us and 96 percent of the stores in Babies R Us, its sister chain, are located within five miles of a store of Target.

The note stated: “Given Target’s mix and store overlap, we see it benefiting disproportionately.”

Credit Suisse compares the situation of Toys R Us and Target to past bankruptcies, using Sports Authority as an example. In the said instances, Dick’s Sporting Goods and Best Buy were in line to profit most, however, in both cases, the overlap of the stores was significantly lower as compared to Toys R Us and Target.

The analysts wrote: “There is plenty of competition, but Target’s overlap is higher than in recent case studies and should be positioned to take a fair share.”

Target has more than 1,800 stores in the United States as well as an increasing online presence.

In a bankruptcy filing that was made this March, Toys R Us accused Target, along with Amazon and Walmart, for its downfall, claiming that the said retailers produced the “perfect storm” to kill off the toy chain after slashing prices on toys during the crucial holiday season. Toys R Us said that it could not be able to offer such low prices since it exclusively relies on toys for a profit.

While Target does not report the toy sales of the company separately, Reuters cited a marketing executive as disclosing that a lack of other strong toy sellers most likely supported Target to keep its “loyalists” away from the stores of Toys R Us.