(Refiles Feb. 22 story to attribute analyst data in paragraph 3 and 10 to UBS analyst Arpine Kocharyan)

FILE PHOTO: Shopping carts are seen at a Target store in Azusa, California U.S. November 16, 2017. REUTERS/Lucy Nicholson

(Reuters) - Target Corp TGT.N should hold off on plans to cash in on a perceived advantage in toys after the collapse of Toys "R" Us, several of the company's investors told Reuters, worried it could eat up capital desperately needed in an Amazon-dominated retail world.

When the biggest toy retailer in the U.S. went bankrupt last September, analysts parsing through the wreckage came to the conclusion that Target would be among the biggest beneficiaries.

Of the 182 Toys “R” Us stores scheduled to close in the first half of 2018, 93 percent are within a 15-minute drive of at least one Target store, UBS analyst Arpine Kocharyan said and analysts say the department-store chain should see more traffic as a result.

The Minneapolis-based company was already in the middle of a push that saw it add 1,400 new toys to its catalog in 2017 and Wall Street brokerages say it could see a 30-45 basis point jump in overall group sales as a consequence of the bankruptcy.

“We are playing to win in toys. We think there is opportunity to expand share,” Chief Executive Officer Brian Cornell said on a conference call last November.

Target has also launched a number of exclusive toys including a board game based on Bob Ross's Joy of Painting TV show and introduced a line of action figures based on characters from Netflix's NFLX.O smash hit "Stranger Things".

The investors who spoke to Reuters in the past month were not convinced.

“We do not believe Target should invest more in selling national brand toys, and Target’s toys business is not core to our investment thesis,” said Jack Leslie, a portfolio manager for Miller/Howard Investments Portfolio, who holds a $96 million stake in Target.

HEAD ON FIGHT

Target declined to say how much it is spending on toy advertising and repositioning itself, but the company did lay out plans last year to spend $2 billion on promotions, stores and technology to fight other retailers head on.

UBS’s Kocharyan estimated the company could get a 0.4-0.45 percent boost in revenue even if it only managed to capture 25 percent of the sales lost by Toys “R” Us.

Target’s stock, down over 10 percent in 2017, has recovered those losses to trade up 11.7 percent this year.

Yet the picture is cloudy and complicated by the Toys “R” Us restructuring and the underlying factors behind its bankruptcy.

The toy chain collapsed mainly by its inability to service a huge debt load piled on it by its private equity buyers, KKR & Co LP KKR.N and Bain Capital LP, amid tepid sales and a broader shift toward online shopping.

Sector analysts are unsure how long it will take Toys “R” Us to emerge from bankruptcy.

If Target wants to get, and as importantly, keep the customers Toys “R” Us lost, then it will need to invest solidly in marketing itself as a major toy retailer.

At the same time there is the Amazon factor that continues to upend the traditional retailing industry everyday.

“The toy category is not a growth category,” said Steven Roorda, an analyst and portfolio manager with Minnesota-based Stonebridge Capital Advisors, who has covered Target for 30 years and owns shares of the company.

“U.S. birth rates are moderating and along with children using other devices to access entertainment at an earlier age (that) means that the toy category has been under pressure as evidenced by what is going on with (toymaker) Mattel.”

Four of the institutional investors who Reuters spoke to said they would rather see Target focus on exclusive private-label brands, expanding its online business and open more stores next to urban campuses to make it “un-Amazonable”.

“Is Target going to improve its business, improve its traffic and will there be a halo effect from selling more toys. I think the answer is yes, yes and yes,” said John Tompkins, a portfolio manager at Tyvor Capital, which owns more than 300,000 shares in the retailer.

“Would I raise my stake specifically related to this because I think their toy business is going to get better, no.”