Toys R Us Loss Widens as Sales Decline
Toys R Us Inc., the No. 2 U.S. toy seller, said Monday that its fiscal first-quarter loss widened after it closed more than 90 stores and shed about 3,800 employees. Sales fell for the first time in two years.
The net loss increased to $28 million, or 13 cents a share, from $26 million, or 12 cents, a year earlier, the Wayne, N.J.-based company said. Sales in the period ended May 1 declined 2.6% to $2.06 billion.
Toys R Us shut the majority of its 36 Imaginarium stores and said it would sell 124 Kids R Us locations to Office Depot Inc. amid competition from industry leader Wal-Mart Stores Inc. The company had pretax expenses of $21 million in the quarter related to Kids R Us.
Falling sales are “obviously the biggest concern,” said Tim Urquhart of Chicago-based Perkins Wolf McDonnell & Co., whose $6 billion in assets under management include Toys R Us shares.
Investors and analysts have said the company may need to shut underperforming Toys R Us stores.
Wal-Mart’s discounting helped it unseat Toys R Us as the largest toy seller in 1998 and also helped lead to the bankruptcy filings of toy retailers FAO Inc., owner of the FAO Schwarz and Zany Brainy chains, and KB Toys Inc., the largest U.S. mall-based toy seller.
Toys R Us said sales at its U.S. toy stores open at least a year fell 5.6% in the quarter. Video game sales plunged 27% and international comparable-store sales fell 3.1%. Sales at the company’s Babies R Us stores rose 9.6%, with comparable-store sales increasing 4.6%.
Shares of Toys R Us fell 24 cents to $14.14 on the New York Stock Exchange. They’ve risen 12% this year.
Toys R Us Chief Executive John Eyler hired Credit Suisse First Boston this year to help evaluate all assets after his strategy of upgrading U.S. stores, improving service and offering more exclusive toys failed to win back shoppers.
“The stock clearly reacted to some people’s expectations that the strategic review was going to be done,” said Marc Ravitz, who helps manage about $500 million at Grace & White Inc. in New York, including Toys R Us shares. “It’s going to take a long time. It’s not going to happen this afternoon.”
