Toys R Us: Renewed Prosperity for American Girl?

Mattel subsidiary American Girl, Inc., of $100-doll fame, has partnered with Toys R Us to make American Girl branded dolls and accessories available for the first time outside of its 20 American Girl stores and website. The execution: 700-square-foot American Girl stores-within-a-store at 97 “select” Toys R Us locations in time for the 2016 holiday season with additional locations slated for 2017.

After banking record revenue of $632.5 million in 2013, American Girl, Inc. is faced with a challenge: Two consecutive years of declining sales (see below) and a miserable first half of 2016 in which gross sales have declined 15%. Toys R Us, for its part, has produced years of declining total sales, net losses and negative domestic same store-sales growth.

The move is a definitive win for Toys R Us – a significant boost to foot traffic, resulting in increased sales throughout the store, along with the shine of being associated with the formerly-exclusive premium doll brand. American Girl, alone, won’t be the cure for what ails Toys R Us, but it helps.

For American Girl, the picture isn’t as clear cut. Greater sales and access to new customers are a given. The problem, though, lies in the move’s effects on the brand’s cache and its long-term ability to support its price points that rest in large part on its products’ exclusivity. Given enough time, most brands eventually face the decision on if and when to cede a level of exclusivity in return for greater sales volume. American Girl has taken steps to limit the effect on the brand by limiting the Toys R Us assortment to the Truly Me and WellieWishers product lines. Seeing this move as a long-term positive for the brand, though, is difficult. More likely, it will prove to be the first step (whether planned or not) in repositioning the brand and a reliance on moving a lot more dolls to compensate for lowered price points.