Toys R Us inks WH Smith deal to trial in-store sites

The failed global toy retailer will make a bricks and mortar comeback, but the company tips it won’t bring in significant cash.

The Australian listed company Toys R Us that owns a number of licences for the failed global toy retailer will open trial stores in Britain through a trial with British high street retail giant WH Smith.

Remnants of the failed global toy retailer Toys R Us will make a return to bricks and mortar stores after the ASX-listed toy company that owns licences to the Australian and British e-commerce websites for the toy brand inked a deal with British high street retailer WH Smith.

The publicly listed Toys R Us, which competed a backdoor listing of its Toys R Us, Babies R Us and some hobbies businesses into the old ASX company Funtastic in late 2020, said on Friday it had signed an exclusive sub-licence agreement with WH Smith to trial nine in-store subleases in the United Kingdom.

These trial Toys R Us store-in-store shops are scheduled to open in the first calendar half of 2023.

The trial period will last for 12 months, or longer if mutually agreed, and will include the sale of toys, games and family/children related products typically sold by Toys R Us.

Under the deal WH Smith will pay Toys R Us a fixed percentage royalty fee based on sales revenue generated within the subleased stores and the costs associated with operating them will be borne by WH Smith.

Toys R Us, under its Australian ownership structure, has been planning a comeback in Britain for a number of years and at this stage, as a trial, it is not expecting to generate material levels of revenue.

Upon successful completion of the WH Smith trial period and achievement of mutually agreed key performance indicators, there may be a second part to the rollout of further stores over the initial term of the agreement of approximately 10 years with the ability to grant a further term of 5 years subject to certain conditions being met, the company said.

Last month the ASX-listed Toys R Us, which owns the Toys R Us licences as well as a hobbies and tech distribution business, posted a 74 per cent rise in full-year revenue to $37.9m for the year to July 31 as net losses blew out to $24.7m from a loss of $3.1m in 2021. The worsening loss for 2022 reflects a goodwill impairment charge of $14.5m linked to its retail arm, as well as increased operating expenditure and investment in marketing, working capital and inventory to fund its ambitious growth strategy.

On Friday shares in Toys R Us were trading weaker, down just under 1c, to 5.3c.