Toys R Us Posts 2nd-Quarter Loss but Predicts Profit for 4th
Toys R Us Inc. reported a second-quarter loss Monday after the No. 1 U.S. toy chain spent heavily to remodel its stores, but the stock rallied after the company predicted a rebound in profit by the fourth quarter.
The stock surged $1.62, or 7.2%, to $24.02 on the New York Stock Exchange.
Separately, Lowe’s Cos. posted an 18% rise in profit for the second quarter as the home-building and remodeling markets remained healthy, boosting shares of the home improvement retailer 8%.
Toys R Us, second in toy retailing to Wal-Mart Stores Inc., posted a net loss of $29 million, or 15 cents a share, for the quarter ended Aug. 4, compared with a profit of $3 million, or 1 cent, in the year-earlier period.
The results matched Wall Street expectations that were revised last month after the company warned of lower profit because of a sluggish economy and continued investments in store remodeling.
Sales rose 1.4% to $2.02 billion. The company’s sales at stores open at least a year were unchanged from a year ago. Analysts were comforted by that performance, compared with the 2% decline in same-store sales reported in the previous quarter.
The retailer, citing strong momentum for the video game business and a positive impact on sales from its store renovations, said it is positioned to deliver a fourth-quarter profit in line with analysts’ estimates of $1.52 a share.
Chief Executive and Chairman John Eyler told analysts in a conference call that he’s comfortable with the full-year profit estimate of $1.19 a share, which is in line with analysts’ consensus.
The company’s renovated stores are outperforming the rest of the chain by 7%, Eyler said. And its exclusive merchandising programs are expanding; they were the primary drivers of a gain in gross margins in the second quarter, the company said.
The positive outlook prompted Margaret Whitfield, an analyst at Tucker Anthony Capital Markets, to raise her rating on the stock to “buy” from “market perform.”
At Lowe’s, earnings in the quarter ended Aug. 3 rose 18% to $329.1 million, or 42 cents a share, from $279.6 million, or 36 cents a share, a year ago.
The results, which reflect last month’s 2-for-1 stock split, were a penny higher than the consensus estimate of 41 cents, according to research firm Thomson Financial/First Call.
The Wilkesboro, N.C.-based retailer, which ranks behind industry leader Home Depot Inc., said sales rose 16% to $6.1 billion. Same-store sales rose 1.7%, reversing a 3% decline in the first quarter.
Lowe’s said its bigger stores drove the same-store sales turnaround and noted that sales to commercial customers rose markedly. It sees same-store sales rising 2% to 4% in the third quarter.
The company said it expects to report a profit of 30 cents to 32 cents a share for the third quarter, ending Nov. 2, in line with the current range of analysts’ estimates.
Lowe’s Chairman Robert Tillman said sales of appliances, paint and other items were strong as consumers invested in their houses.
Richard Hastings, an analyst at Global Credit Services, a retail credit-rating firm, said the exit of Circuit City Stores Inc. from the appliance market helped Lowe’s boost sales of bigger-ticket items.
Shares of Lowe’s jumped $2.80, or 8%, to $37.84 on the NYSE.
Separately, apparel retailer American Eagle Outfitters Inc. said fiscal second-quarter profit climbed more than fivefold to $15.3 million, or 21 cents a share, meeting analyst expectations. Sales surged 40% to $292.4 million.
The company said, however, that it expects earnings in the current quarter of 45 cents to 47 cents a share, missing analyst expectations of 49 cents.
Shares of Warrendale, Pa.-based American Eagle closed up $1.43 at $32.27 on Nasdaq before the announcement.
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Hope for Toys
Toys R Us shares jumped $1.62 to $24.02 on word that store renovations will bear the fruit of profit this year.
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Toys R Us shares, monthly closes and latest on the NYSE
Monday: $24.02 up $1.62
Source: Bloomberg News
