Toys "R" Us sees "cool" toys helping holidays

NEW YORK (Reuters) - Toys "R" Us will not be affected like other retailers this holiday season, and cash-strapped consumers will still buy "cool" toys for their kids, the toy retailer's chief executive said on Tuesday.

"I certainly believe people won't spend money the way they spent money in the past... for example, on the extravagances of life, on expensive vacations," CEO Jerry Storch said at the Reuters Consumer and Retail Summit in New York.

"But toys as a whole, even expensive toys, aren't very expensive."

Toys "R" Us and others in the toy industry like Mattel Inc MAT.N and Hasbro HAS.N derive a significant chunk of their sales from the holiday shopping season each year.

This year, however, investors and analysts worry that weak consumer spending may not bode well for retailers as soaring gas and food prices, a housing market downturn and tighter credit conditions force shoppers into choosing where they spend their spare dollars.

The retailer, which has 584 namesake stores and 261 Babies "R" Us stores in the United States, and 687 stores overseas, is in the process of converting its Toys "R" Us and Babies "R" Us shops to a side-by-side format.

Even though several retailers are rethinking their growth plans and shutting underperforming stores, Storch said the company would plow on with its plans.

"We're going to stick to our strategy and stay on the same pace," Storch said.

"For us, of course, we want to be where people with kids are," he added, referring to locations that Toys "R" Us wanted for its stores.

Storch said the company's net number of stores would increase after the side-by-side store conversions.

A consortium consisting of Bain Capital Partners, Kohlberg Kravis, Roberts & Co, and Vornado Realty Trust bought Toys "R" Us in 2005.

Storch declined to say if the company would consider going public again.

INVENTORY, ONLINE

Storch stressed the importance of managing inventory, and said the retailer was working to improve the rate at which it sells the inventory it has, but declined to discuss if Toys "R" Us was planning for lower inventory this holiday season.

Toys, like any other products, were facing the pressure of inflation, Storch said.

"Nothing comes to mind that doesn't have inflationary pressure right now across the economy. That includes diapers," he said.

There was a definite value in having a Web site, where shoppers often go to look at toys and games, or merely get directions to the nearest store, Storch noted.

Though shipping physical products to consumers was "too darn expensive," he said some retailers would still do it to entice shoppers.

"People will continue to use (free shipping) as a stimulus to sales. You might call it a drug... or a business stimulus,' Storch said.

Storch also said that holding several licensed toy brands in its stores differentiated it from discount retailers like Wal-Mart Stores Inc (WMT.N).

(For summit blog: summitnotebook.reuters.com/)

(See here for SHOP TALK -- Reuters' retail and consumer blog)

(Editing by Phil Berlowitz)