Transformers...coming to a Sears near you?

WILMINGTON, Delaware (Reuters) - Sears stuck its toe back into the toy business on Tuesday, with 20 stores clearing space for kids to interact with the latest best-sellers and nostalgic throwbacks like tin tops.

The retailer hopes the toy departments will fill a void left by the demise of mall specialty stores such as KB Toys.

"That's what we're hearing more and more from our core consumer, that they would like to buy (toys) in the mall," said Julia Fitzgerald, chief marketing officer for Sears' toy business.

Sears, a unit of Sears Holding Corp (SHLD.O), plans to dedicate about 1,500 square feet of floor space in each of the 20 stores and offer roughly 600 different items.

The venture returns Sears to a segment with which it has a rocky history. Earlier this decade, Sears experimented with "store-within-a-store" partnerships with KB Toys, but ultimately pulled the plug.

Since KB Toys went out of business earlier this year, closing its 460 stand-alone stores, a niche has opened for Sears, Fitzgerald said.

Sears operates 929 department stores.

Popular toy destinations now include stand-alone stores like Toys "R" Us, as well as discounters Wal-Mart Stores Inc (WMT.N) and Target Corp (TGT.N).

Fitzgerald said Sears will carry toys made by Hasbro Inc (HAS.N) and Mattel Inc (MAT.N) as well as Leapfrog Enterprises Inc (LF.N), which makes educational toys, and Schylling, a maker of retro products such as tin jack-in-the-boxes.

Sears Holdings, formed in 2005 when hedge fund manager Edward Lampert merged Sears and Kmart, has struggled to sell its mainstay Craftsman tools and Kenmore appliances amid a housing market crash.

The other focus of its retail operations, its apparel business, has been squeezed by discounters such as Wal-Mart and Target and a slumping economy. As a result, analysts have said Sears has a glut of floor space in most locations.

Sears has been experimenting with different pathways to growth, such as offering lay-away plans and letting customers buy online and return or pick up in stores.

The company's shares, which have doubled since the stock market bottomed in early March, were down 2.1 percent at $75.32 in afternoon Nasdaq trading.