Toys R Us Profit Declines 57% in Third Straight Quarterly Drop
Toys R Us Inc. said Monday that its earnings dropped 57% in the fiscal second quarter, its third straight quarterly drop, amid competition from discount chains.
The world’s largest toy retailer earned $15.9 million, or 6 cents a share, a penny higher than analysts forecast, down from $36.7 million, or 13 cents, a year earlier. Revenue inched up 1.6% to $2.02 billion.
Toys R Us said sales at its U.S. stores open at least a year--”same-store sales”--fell 2% because there were no hit toys to bring in customers, such as the “Star Wars” and “Jurassic Park” action figures and the Tamagotchi electronic pets did a year ago. Toys R Us relies more on hit toys to attract customers than do other retailers, which sell a variety of products. And discount chains such as Wal-Mart Stores Inc. and Target often undercut Toys R Us on popular items to draw shoppers in.
Sales were also hurt by lower demand for video games and the struggling Japanese economy.
Analysts said the company’s spending on strategic initiatives, including a new management team and refining its core business, also clipped profit.
But the company said it expects cash flow to improve for the rest of the year as its drive to cut inventory was ahead of schedule.
Slow sales have left Toys R Us with larger-than-expected inventory levels, forcing it to delay shipments from suppliers while it clears its shelves.
Toys R Us accounted for 18.4% of the U.S. toy market last year, down from 18.9% in 1996, according to market researcher NPD Group. Wal-Mart’s share rose to 16.4% from 15.3%, while Dayton Hudson Corp.’s Target rose to 7.1% from 6.4%.
Toys R Us shares rose 19 cents to close at $20.19 on the New York Stock Exchange.
At a Glance
Other retailers’ earnings reports, excluding one-time gains and charges unless noted:
* Lowe’s Cos. said second-quarter earnings rose 31% to $165.4 million, or 47 cents a diluted share, a penny higher than estimates, as sales got a boost from a strong housing market, which encouraged people to spend money on home improvements. Sales climbed 22% to $3.43 billion and sales at stores open at least a year were up 6%.
* Tiffany & Co.’s second-quarter earnings rose a better-than-expected 30% to $13.5 million, or 37 cents a diluted share, beating estimates by 3 cents. The retailer of jewelry and other luxury items said sales rose 14% to $247.7 million, with strength in Japan as well as the United States. Same-store sales at its U.S. stores rose 15%, and sales from catalogs and other direct-marketing efforts rose 18%. Same-store sales in Japan jumped even though Tiffany raised prices an average of 10% in February because of the declining yen.
