Kids 'R' Us, the fast-expanding clothing subsidiary of toy seller Toys 'R' Us, has seen its invasion of Puerto Rico wilt in the tropical sun. The children's clothier opened three stores on the island since late 1992, next to Toys 'R' Us outlets. But an uncharacteristically ill-conceived marketing effort led to poor sales, so the three outlets will be closed, and plans for five more are shelved.

Puerto Rico looked like a paradise for the Paramus (N.J.) company's clothing stores. Although the island trails even the poorest U.S. state in per capita income, retailers such as Kmart and J.C. Penney prosper there. Puerto Ricans spend 55% of disposable income in retail stores vs. 43% on the mainland.

But analysts say the chain banked on back-to-school sales, not understanding that Puerto Rican kids all wear uniforms to school. Plus, a lot of the togs were too heavy for the climate. Jeff Handler, the company's marketing director, says its centrally run operations missed on market tastes in Puerto Rico.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE