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Putman Investments to buy Toys "R" Us from Fairfax, brimming with ideas for overhaul

Toys "R" Us and Babies "R" Us Canada are getting a new owner, who is already full of ideas for how to revamp the retailer. Putman Investments said Thursday that it will purchase the Vaughan Ont.
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Toys "R" Us and Babies "R" Us Canada are getting a new owner, who is already full of ideas for how to revamp the retailer. 

Putman Investments said Thursday that it will purchase the Vaughan Ont.-based brand and its 81 toy and children's stores from affiliates of Fairfax Financial Holdings Ltd.

The company didn't reveal the deal's value, but Fairfax chief executive Prem Watsa said in a statement that his company will benefit from a continuing royalty stream and keep the real estate it acquired when buying the retailer for $300 million in 2018 from its U.S. parent, which had filed for bankruptcy protection.

Doug Putman, who runs the family-owned and Ancaster, Ont.-based investment firm, said he pursued the deal because he felt Toys "R" Us and Babies "R" Us Canada were a "fantastic fit" for his company given his experience overhauling iconic retailers.

"We love buying businesses that we feel are undervalued. We love a good turnaround," he said.

"We definitely think that there's a lot more growth and opportunity with Toys "R" Us in Canada, so I think we're excited to take on the challenge and start growing the business again."

Putman Investments owns Sunrise Records and Entertainment Ltd. and HMV. Last year, it purchased recently closed DavidsTea locations to turn into locations for its T. Kettle tea chain.

The company has leaned on the nostalgia people have for the brands it has acquired when turning them around, but has also expanded into new product categories and worked on bringing a sense of discovery and excitement to the stores.

When Putman looked at Toys "R" Us and Babies "R" Us, he saw great products and enthusiastic staff, but thought the stores "need to get more fun" and become more of an experience for kids.

"We've got to look at everything through the eyes of a child," he said.

The Toys "R" Us Canada that Putman will take over has spent the last few years tweaking its locations and products and exploring new revenue streams.

When the U.S. entity was struggling, Toys "R" Us Canada unveiled a plan to add benches to play areas, where children can test new products or take part in crafts and games. 

Former Toys "R" Us president Melanie Teed-Murch also considered allowing families to throw birthday parties at stores, opening smaller locations and exploring food and beverage integrations.

While not all those plans came to fruition, Putman appears to have similar ideas.

"We've got this list of 100 really great ideas, whether it's birthday parties or a place to eat or... because we own T. Kettle, do you do something where kids can come in and have tea with a princess or some of the other characters?" he said. 

"I think there's lots of options out there for us."

But there's a lot of competition for their attention and pressure facing toy companies these days. Video and online games have exploded in popularity, Mastermind Toys stores has expanded rapidly and online giants Amazon and eBay have become popular toy retailers too.

The changes were among the factors contributing to Toys "R" Us in the U.S. filing for bankruptcy in 2017.

The U.S. chain, which has long been a separate entity from Toys "R" Us Canada, has since been staging a comeback and announced plans recently to begin opening as many as 400 locations inside Macy's department stores next year.

Neither the U.S. troubles nor the COVID-19 pandemic, which closed retailers for lengthy periods of time over the last two years, were enough to deter Putman.

"Everyone always has nerves and you're excited before you do the deal and  after you do the deal, but of course at times you know at times it feels like you've got so much to do and how are you going to accomplish it all?" he said.

"But I think that's the fun part and you have to enjoy the process."

Though his deal to buy Toys "R" Us hasn't closed yet, he expects it to be wrapped up "quickly" and is already willing to make one promise: the retailer's giraffe mascot Geoffrey isn't going anywhere.

"I brought my two-year-old in and when Geoffrey the giraffe came out, she was just stunned. For weeks later, it was like 'can we go see Geoffrey? Where's Geoffrey?" he said.

"You can't get rid of Geoffrey. I think 100 per cent, Geoffrey sticks around."

This report by The Canadian Press was first published Aug. 19, 2021.

Companies in this story: (TSX:FFH)

Tara Deschamps, The Canadian Press

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