As I was doing it I decided that I would try and make a tutorial so others can do the same thing! This is my first ever attempt at a tutorial so be kind! (But please leave a comment if you need anything clarified!)
The ones in the shop were a board backed piece of foam wrapped in material. I had originally thought to do this as well but in the end I decided on simply making them solid. If you want to make them 'squashy' then you would need to buy flat wooden letters and foam: cut foam to shape and glue to the wooden letters, then follow below.
Material Covered Letters
Board Box Letters
Material in your chosen colour scheme
Pencil or fabric chalk