A behind-the-numbers look at the winners and losers among the nation’s largest toy, game and children’s entertainment retailers

Despite bankruptcies and buyouts, broken contracts and the ever-present spectre of age compression in the toy business, America’s Top 25 retailers of playthings managed to overcome many obstacles on their way to registering $31.6 billion in toy sales in 2006, an increase of 4.9 percent over 2005’s $30.2 billion performance. That’s the finding of PLAYTHINGS’S latest ranking of the largest players in the children’s entertainment retailing industry, a segment that sold traditional toys and games, video and computer games and consoles, bicycles and other fun-filled products through 39,080 door fronts in 2006, up a net 1,628 doors from 37,452 in 2005.

The top three

Among the top three retailers on our list, little changed but the relative distances between them.

Ranked as the No.1 toy retailer since 2000, Wal-Mart, Bentonville, Ark., garnered toy sales of $10.75 billion in 2006, a net increase of $780 million over 2005’s $9.8 billion tally of playthings sales. The world’s largest retailer accounts for more than a third of our Top 25’s total toy and video game sales.

Wayne, N.J.-based Toys “R” Us held on to the No.2 spot last year, with 2006 sales of $5.7 billion, down 8.4 percent from $6.2 billion in 2005. TRU’s figures include sales from brick-and-mortar stores and online sales from Toysrus.com, reflecting a corporate organizational and reporting change during the third quarter of 2006. After closing 85 under-performing stores in 2006, cleaning up its remaining units, and severing its ties to Amazon.com, TRU these days is banking on providing customers with more exclusives and always having the hottest items in stock.

Grapevine, Texas-based video game retailer GameStop—the list’s No. 3 retailer since 2005, when it overcame Target for the bronze position—pulled in 2006 sales of $4.3 billion, an increase of 15.6 percent from its 2005 sales of $3.7 billion. Helping to fuel growth at the electronic entertainment specialist was a net 175 new store locations in 2006.

In comparing 2006 versus 2005 among the top three, Wal-Mart continues to pull away from TRU, while GameStop continues to close the gap between it and TRU. There was a whopping difference of $5 billion between Wal-Mart and TRU in 2006, compared with a $3.7 billion gap in 2005. Only $1.5 billion separated TRU from GameStop in 2006, versus $2.6 billion in 2005.

Growth leaders

Of all the retailers on 2007’s list, Army & Air Force Exchange Service (No. 14) recorded the largest sales growth percentage in 2006, growing its toy business 20.7 percent to $286 million in 2006 from $237 million in 2005. Dallas-based AAFES sells toys through more than 150 stores worldwide, catalogs and the Internet.

St. Louis-based Build-A-Bear Workshop grew its sales by 19.5 percent from 2005 to 2006. That impressive sales gain moved the specialist up two spots to No. 10. It opened 29 new stores in the U.S. during 2006 and plans to open 37 new North American stores last year, including its first in Alaska, Montana and Puerto Rico.

Minneapolis-based Target increased its playthings sales by $400 million in 2006. The discount giant’s 2006 toy sales were $3.45 billion, an increase of 13.1 percent from $3.05 billion in 2005, helped by an ever-growing assortment of high margin specialty toys. Target has held onto the No. 4 position for the past two years.

When measuring growth by doors, five retailers opened a net of 100 or more stores in 2006: No.17 Walgreen topped the chart with 485 stores, followed by No. 19 Family Dollar with 317 new stores, No.18 Dollar General with 300 new stores, No.3 GameStop with 175 new stores and No.1 Wal-Mart with 142 new stores.

By channel

The entertainment/electronic specialist channel, comprised of No.3 GameStop, No.5 Best Buy and No.8 Circuit City, registered the fastest sales growth of any channel—14.8 percent. The three companies, continuing to ride the video game boom, together opened a net 278 stores in 2006 to end the year with 5,272 doors.

No,1 Wal-Mart and No.4 Target are the undisputed leaders of the discount department store channel. Discounters on the list sold $16.7 billion worth of playthings in 2006, up 7.9 percent from 2005 sales of $15.5 billion. They sold toys through 22,808 doors in 2006.

As a channel, toy and related children’s product specialty stores garnered $7.2 billion in 2006 sales and comprised 22.9 percent of the Top 25. Specialty stores Build-A-Bear (No.10) and Babies “R” Us (No. 25) experienced double-digit growth, while playthings sales for No.9 Amercian Girl were flat. Both KB Toys (No.7) and Toys “R” Us (No.2) had sales declines.

In all, five retailers on the ranking experienced toy sales drops from the previous year: No7 KB Toys, down a whopping 27.6 percent; No. 22 Sears, down 8.8 percent; No.2 Toys “R” Us, down 8.4 percent; No.6 Kmart, down 2.3 percent; and No.21 ShopKo, down 1.2 percent.

How the List was compiled

PLAYTHINGS' exclusive survey ranks the Top 25 U.S. retailers by their estimated 2006 toy sales. Retailers were considered for the ranking if they carry more than one toy category. Retailers are ranked by their estimated 2006 sales of traditional toys and electronic interactive toys, as well as video/computer game and systems

In some cases, because of the way certain retailers organize their departments, figures may include a portion of sales of sporting equipment (including scooters, skateboards, baseball bats, basketballs) , bicycles and/or related goods.

Sales data is based on calendar years ending Dec.31, 2006, fiscal years or trailing 12 months closest to date. All sales figures, except those of publicly held companies that break out toy sales as a separate line of business, are estimates from  PLAYTHINGS Market Research.

Estimates were derived using a variety of sources, including the companies themselves, public company filings with the Securities and Exchange Commission, discussions with industry analysts and suppliers, as well as published and unpublished reports, including newspaper articles in various retailing areas. █