Toys R Us CEO on Price War With Walmart

This is a rush transcript from "Your World With Neil Cavuto," November 27, 2009. This copy may not be in its final form and may be updated.

BRIAN SULLIVAN, GUEST HOST: When Walmart takes aim at the toy world, what in the world are toy stores supposed to do? Well, they have got to get creative. That's what — Toys R Us offering a $50 gift card with the purchase of $199 iPods and lots of exclusive products. It's also drawing big crowds, the old classics, like Barbie, Lego and Crayola products.

Jerry Storch is the CEO of Toys R Us. Jerry, long time no talk. It's Brian Sullivan. Good to chat with you.

Let's get to these hamsters, all right? And I know you are in a bit of a price war with Walmart and maybe with Amazon.com, but you guys did something smart. You knew that what was going to be hot, and you stocked up.

JERRY STORCH, CEO, Toys R Us: That is what we do. We are the toy authority. People come to Toys R Us because we carry massively more toys than the other guys. It is not even close.

Moreover, they know we're going to be in stock on the hottest toys, like Zhu Zhu here, all the way up to Christmas. And, you know, the vast majority of toys we carry, the limited assortments of mass merchants don't even have in their assortments.

And we are very competitive on price. We have always been. Everybody knows that about Toys R Us.

SULLIVAN: Well, if you look at those hamsters online, like some foolish TV anchors have done, they are trading at about 70 bucks. In store, they are about eight or nine bucks. Do you think you're going to have enough through the holiday season?

STORCH: Well, we will.

We have them in stock right now. I'm here in our Times Square store, and they're at the registers. People are buying them now. We have sold tens of thousands of these Zhu Zhu pet hamsters today. We will sell out before the day is over, but we will be getting in additional shipments, and we expect to get hundreds of thousands of more of these hamsters before Christmas.

SULLIVAN: So, that's how you win, right? Again, a lot of the commoditized projects, you're going to get into price war. The margins are going to be razor-thin. You have got to have the right items like that, also I guess the Bakugan, which I believe is some sort of like Japanese karate card game.

(LAUGHTER)

SULLIVAN: I'm not even sure what that is. And Wii Resort, some of the Wii games.

STORCH: We carry tons of — tons of products, toys, video games. Most of the products we carry, the limit assortment mass merchants don't even have in their assortment.

But, believe me, we are very priced very sharp. We are very aggressive. This is our time of year. In holiday time, everybody wants to be Toys R Us, but there's only one Toys R Us. We are the toy authority. We have more toys. And we are going to be very aggressive all year long.

SULLIVAN: Well, we are showing the crowds at your store right around the corner here from our studio on New York. Obviously, it's a flagship. It's got a — it's a huge store. It's packed.

I'm more concerned about the Toys R Us in Kansas City, or in Dallas, or in California. How are the non-New York area stores doing?

STORCH: We opened our stores midnight tonight for the — last night, or tonight, whichever one it is — it has been a long — a long day — for the first time. And the stores were — were — were packed then.

On average, there were 1,000 in line at every store around the country, and they have been crowded ever since. You can see right here now how mobbed this store is. And we have been open for 16 hours already. It has been nonstop business ever since we opened at all of our stores, not just here in Times Square.

SULLIVAN: You know, we see the videos at Toys R Us everywhere, right, these people stomping each over, throwing elbows.

You obviously want to generate buzz, but how do you, as a CEO, crowd control? You don't want to be a concert. It's not like The Who Cincinnati 1979. I mean, you have — you have got to manage the flow. How do you do it? And do you guys have any incidents that have occurred at any of your stores in the last 12 hours or so?

STORCH: Well, we have millions of people coming through our stores on Black Friday, as you might imagine. And we have strict line control. We work hard to make sure that there — that there — that there are not that kind of incidents.

I'm not aware of any serious incidents that happened today, despite millions of people being in our stores. One of the things we did was, by opening five hours earlier, we lengthened out the hours and spread out the day, so it was not as packed at any one time.

SULLIVAN: I think the idea then is maybe to open up December 26 for Black Friday next year.

(LAUGHTER)

STORCH: Well, that could be OK.

Honestly, we do most of our business during the holiday season. Toys R Us really is the Christmas store. This is where people come to get that great gift for their kids for the holiday. And we have seen it year in and year out...

SULLIVAN: Yes.

STORCH: ... that the last thing they are going to cut back on is that holiday present for their kids.

SULLIVAN: Oh, good point. Let's — we hear that a lot. It is like a well-one anecdote in the market, right? Well, you might not buy yourself something, but you are not going to shortchange your kids.

Do you really believe that is true? Do you think that the purse spend on children will be as high this year as it has in years past, in better economies?

STORCH: Well, last year, we had a positive same store sales in December. We're one of the few retailers who did. And we have — have done that for several years in a row.

And that had to have been the worst possible imaginable economy last Christmas. So, as we sit here right now, we see better times, and we hear that people are shopping. We look at the products that we are selling, and consumers are not buying the cheap products. They're not saying, oh, where — what is the cheapest way I can get a holiday present for my child? They're looking for the hot toys and for the great toys.

A great example is one you mentioned, which is Lego. Lego is selling very, very well. And Lego is anything but cheap. It is a great toy. It's safe. It's high-quality, and it lasts for years. And they are selling fantastically at pretty high price points.

SULLIVAN: Jerry Storch, CEO of Toys R Us, listen, I know you have been working all — I don't even think you have slept. Thanks for taking some time for us here on "Your World."

And have a great weekend. We will talk to you soon.

STORCH: All right.

SULLIVAN: Jerry Storch and Zhu Zhu the hamster, thank you.

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