Toys “R” Us, the nation’s second biggest toy retailer, plans to convert one of its two Manhattan stores into a Babies “R” Us, giving the company a prime location for its fast-growing division that sells baby furniture, apparel, and accessories.

The Union Square store will be closed in February or March for renovations. Its 50 employees have been offered positions at other Toys “R” Us stores, a company spokeswoman Susan McLaughlin said yesterday. Severance packages are expected to be worked out for employees who cannot or choose not to relocate, she said.

The store is liquidating merchandise in anticipation of the conversion, Ms. McLaughlin said. Toys R Us’ flagship store in Times Square will not be affected.

The plan for the Union Square store, announced by the company yesterday, comes a month after the company said it expects to separate its Toys R Us business from the Babies R Us operations in the first half of next year.

The Wayne, N.J.-based toy retailer al has also been mulling the possible sale of its toy business.

Ms. McLaughlin would not comment on restructuring plans but said, “Toys ‘R’ Us and Babies ‘R’ Us are both profitable businesses.”

An independent toy-industry analyst, Chris Byrne, said the plan for the Union Square store makes sense and fits either course of action the company takes.

“If they do split off Babies ‘R’ Us, it gives them a location in Manhattan,” Mr. Byrne said. “The baby business really has been booming.”

The Union Square Toys “R” Us store is “redundant” to the Times Square location, Mr. Byrne said, so closing it would not take “anything away from the Toys R Us brand; the Times Square store is so comprehensive.”

The company has 215 Babies “R” Us stores and 685 Toys “R” Us stores nationwide. It plans to close two stores on January 31 – one in Rocky Mount, N.C., and another in Revere, Mass. – because new leases could not be worked out, Ms. McLaughlin said. Employees at those stores will be offered positions at other locations, she said.

Ms. McLaughlin would not disclose any sales information for the critical holiday season, but the retailer’s recent performance is expected to play a big factor in the company’s future and will determine whether stores will be closed next year.

The company is due to report holiday sales figures to investors on January 6.

Mr. Byrne said it is too early to pinpoint where the holiday shopping season stands.

Shoppers still have gift cards to redeem, and the cards do not count as sales until they are used.

But he said there were some healthy signs this year for Toys “R” Us. The retailer matched some price cuts by Target and Wal-Mart, but didn’t need to drop prices again to boost sales toward the end of the buying period.

“They were the only ones with stock of the [items] that people were looking for,” Mr. Byrne said.

Shares of Toys R Us fell 11 cents to close at $19.88 yesterday on the New York Stock Exchange.