Toys "R" Us Bull's Rebuttal
by Rick Munarriz ([email protected])

What an Ebenezer my fellow Fool has become. She quite colorfully points out the burned out "S" and the flickering "Y" at the Crabtree Village storefront. I like the imagery. I love the symbolism. The "S" will no doubt be relit as an "$." As for the 'nervously flickering' "Y" -- that's Yi-Hsin, pecking at the petty in hopes of making her bearish argument stick.

She points out that Toys "R" Us is getting "killed by competitors with lower prices, better products, and better service." Nice try. Lower prices? Toys "R" Us has a price match guarantee. Better products? There is no such thing in a pre-packaged toy world. Better service? She herself even called Toys "R" Us "overstaffed" earlier in her piece. Does she prefer to have the Lawn & Garden clerk at Wal-Mart ask around for what a Furby is? Please.

As for her empty store experience on Black Friday, I am sure most of you, who not only met with me tonight to check out the changes but went shopping that very morning, had to be either scratching your head or trying to contain your laughter. She certainly wasn't out at the Miami Mills Drive location I was at where the line to get in before the 6:00 a.m. opening circled the building.

Maybe she went there long after the early bird deals were gone. Or maybe all the shoppers were ringing up the toysrus.com registers. Last week America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> announced that over the first two weeks of this month 750,000 subscribers had made their first ever online purchase. Wow! It gets better. What do you think the most popular product category was? Books? Clothes? Nope. Toys. Sure, Toys "R" Us may not be the first company to sell playthings online. Just like America Online wasn't the first online service. But the advantages ultimately make the site. No online store will ever buy cheaper than Toys "R" Us. No online store will have 1400 living billboards, each generating almost $10 million in annual sales, to draw in patrons. Why wait for eToys to go public when the eventual leader is this fundamentally attractive?

My worthy Fool then rattles off the names of niche yuppie magnet retailers who juice up the eye candy to accompany higher price tags and lower selection. They are unproven financial entities and the publicly traded one, Noodle Kidoodle <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NKID)") else Response.Write("(Nasdaq: NKID)") end if %> has struggled for years. Is this really the same person who favored frill-free Costco living? If not, then I'm sure she will appreciate the new C-3 format, which will bring back much of the "playland" atmosphere she says is lacking with several interactive play areas.

Yi-Hsin seems to want it all. She wants the Wal-Mart value pricing prowess. She wants the hands-on class of FAO Schwartz. There is only one company that can reasonably marry the two. That's right, Toys "R" Us. As the largest toy buyer in the world it owns the suppliers. As a company with enough flexibility to tinker with its format to adapt to changes, it will soon own the customers, too.

Next: The Bear Responds