Troubled toy peddler Toys “R” Us will convert its Union Square store in Manhattan to a Babies “R” Us — that concept's first location in the city. Industry analysts that follow the company, which has been hurt by the rise of discounters Wal-Mart Stores and Target Inc. in the toy sector, applauded the move. The Union Square store was also made obsolete by Toys “R” Us' mammoth flagship in Times Square. The downtown spot will be refurbished and open in time for next Christmas.