Toys R Us Suffers 75% Plunge in Profit
Toys R Us Inc. on Monday reported a 75% plunge in profit for its second quarter as sales cooled and its year-old Web site continued to drain earnings. Still, the nation’s largest toy retailer beat analysts’ expectations by a penny.
The results were encouraging to some on Wall Street, who said they are optimistic that the company is on the right track with new initiatives such as last week’s partnership with dominant online retailer Amazon.com to jointly sell toys online.
Toys R Us said net earnings for the period ended July 29 fell to $3 million, or 1 cent a share, beating the break-even forecast of analysts surveyed by First Call/Thomson Financial. A year earlier, earnings totaled $12 million, or 5 cents.
Sales slid 9.5% to $2 billion. The company said revenue was hurt by the lack of hot toys compared to last year, when Furby and Star Wars items were in. Although sales at stores open at least a year were up 3% outside the U.S., comparable U.S. toy store sales dropped 2%.
“We all knew that this was going to be a tough quarter from a [comparable] store sales point of view, and in fact comps were negative in the U.S.,” said Ursula Moran, an analyst with Sanford C. Bernstein. “But that wasn’t a surprise.”
The Paramus, N.J.-based seller of games, toys, clothing and other items for children said that excluding losses related to the Toysrus.com operations, earnings were $16 million, or 7 cents a share.
Chief Executive John Eyler said the company’s alliance with Amazon could boost the Web business to break-even by the fourth quarter of 2001 and to profitability by 2002.
Moran said two positives worth noting were an increase in gross margins from the same period one year ago, as well as the previously announced stock repurchase plan through which Toys R Us planned to buy up to $1 billion of its shares.
Moran said the company has partnered with several companies to develop exclusive products, such as the plush “Animal Alley” toys developed with the Animal Planet cable television station and a line of children’s tools developed with Home Depot Inc.
Shares of Toys R Us closed up 63 cents at $18 on the New York Stock Exchange.
At a Glance
Other earnings, excluding one-time gains or charges unless noted, include:
* Gemstar-TV Guide International Inc., the largest U.S. distributor of television program guides, said fiscal first-quarter profit doubled to $28.9 million, or 12 cents a share, 2 cents better than forecasts, as sales jumped 40% to $63.2 million. The Pasadena-based company’s results exclude revenue from TV Guide Inc., which the company acquired after the quarter ended.
* Network Appliance Inc. said fiscal first-quarter earnings jumped 140% to $32.3 million, or 9 cents a share, a penny better than forecasts, as revenue more than doubled to $231.2 million from $103.3 million.
* Lowe’s Cos. said fiscal second-quarter earnings rose 21% to $279.6 million, or 73 cents a share, meeting forecasts, as sales jumped 19% to $5.26 billion. The home-improvement chain benefited from its decision last year to stop selling less-profitable consumer electronics.
* Magellan Health Services Inc. said its fiscal third-quarter profit plunged 82% to $5 million, or 12 cents per common share, well below analyst expectations of 17 cents. Revenue rose 11% to $515.7 million.
*
Bloomberg News was used in compiling this report.
