closed three years ago because it was losing money -- will reopen this fall as the first joint venture of Ward's and Toys R Us.
The store will have a full-size Toys R Us store and a Ward's clothing department on the first floor, and Ward's appliances, furniture and electronics on the second floor, executives of the companies said yesterday. The two stores under the same roof will be managed separately.
If the Gaithersburg venture proves successful, the two chains say they will open as many as 20 similar operations.
For financially troubled Ward's, which is reorganizing and remerchandising its stores in a last-gasp effort to remain competitive, the agreement with Toys R Us represents "a logical step in the transition of Montgomery Ward into a chain of value-driven specialty stores," said Bernard F. Brennan, Ward's president and chief executive.
Over the past few years, Ward's has been trying to transform itself from a general merchandise store carrying almost one of everything to a series of specialized departments that carry only Ward's best-selling goods.
The Gaithersburg agreement with Toys R Us -- coupled with this new merchandising strategy -- will "enable Montgomery Ward to reenter the Gaithersburg market with a real winner," Brennan said.
For Toys R Us, the unique agreement represents a low-cost real estate venture. Terms of the Toys R Us lease agreement were not disclosed.
Ward's "has excellent locations, and our retailing operations will complement each other quite well," said Norman Ricken, president and chief operating officer of Toys R Us. "We look forward to sharing other locations later this year, in 1987 and in the years beyond."
Michael Goldstein, the toy chain's chief financial officer, said the two chains are negotiating several more joint agreements. "There are 10 to 20 stores in the future, he said.
For the time being, Toys R Us plans to open stores in Ward's locations only in cities where the toy chain already operates. However, Goldstein noted, if these joint retailing ventures are successful, they "could be a good way to get very good locations in cities where we don't operate," such as Kansas City, St. Louis and other parts of the Midwest. Ward's has about 700 stores; Toys R Us, 235.
"For Ward's, this agreement will give them the advantage of customer traffic from Toys R Us stores," Goldstein said. "For us, it will give us the opportunity to get into excellent pieces of real estate. And if their remerchandising concept looks good, it will also bring the Ward's customer into our store. So it's a good deal for both companies."
Financial analysts who specialize in retailing agree. "This seems to be a deal that will be good for everybody," said Terence McEvoy of Smith Barney, Harris & Upham Co.
The agreement could represent more than a good real estate deal, added Monroe H. Greenstein of Bear Stearns Cos. With the agreement calling for both companies to share a common entrance and exterior signs, "this tells me that Toys R Us is experimenting with a new strategy" of mixing general merchandise with toys.
Under the agreement, Toys R Us will operate a complete store, with all of its lines, in 50,000 square feet of space.
Ward's, meanwhile, will sell apparel on the first floor and home furnishings, appliances and home electronics on the second floor in 120,000 square feet of space.
Ward's said it is talking to other retailers about similar agreements in other company stores.