Toys 'R' Us Gets Wound Up Again

When a trio of private equity buyers snapped up Toys "R" Us in 2005, many predicted the retailer wouldn't survive. With cutthroat competition in the toy world, some even suspected Kohlberg Kravis Roberts, Bain Capital Partners, and Vornado Realty Trust (VNO) would convert a number of store locations into condominiums. Instead, Toys "R" Us has expanded its revenues by billions of dollars and is likely to file for an initial public offering in early 2010, people close to the company say.

The turnaround underscores the success of CEO Gerald L. Storch's strategy of integrating baby products with toys while ramping up promotions and exclusive products. Now the world's largest specialty toy retailer is out to build market share. "We have the largest assortment of every product at every price point," says Storch. He is rolling out almost 350 temporary Holiday Express stores across the country in the coming weeks, which will add 1 million square feet of retail space.