Tougher times at Toys R Us
Losses grow across quarter
Toys R Us has seen an increase in losses across the first quarter of 2004, reporting a loss of $28m compared to $26m in the first three months to the start of May.
While the post-Christmas period is traditionally the quietest for toy retailers, the increased year-on-year loss, ahead of analysts’ forecasts, shows the urgency of the recovery programme implemented by Toys R Us as it seeks to compete with the increasing share of toy sales being taken by retailers such as Wal-Mart and Target in its home US market.
Total sales were $2.06bn for the three months to May 1, down 2.6 per cent year-on-year. International sales, including the UK chain, declined by 3.1 per cent on a same-store basis, increasing to $416m, up from $376m in total, but reduced to $365m when exchange rates were factored in.
US same store sales fell 5.6 per cent. Video game sales, in a market waiting for a boost from new console launches, were down 27 per cent year-on-year, the biggest factor in the decline.
Costs related to the decision to close the underperforming Kids R Us clothing stores contributed to the increased loss. Accounting changes relating to supplier payments, as well as an increased amount of discounted stock on the market as other US toy retailers shut up shop, also had an impact.
[img r]babiesrussign.jpg[/img]The Babies R Us operation, earmarked for expansion by up to 20 stores this years, saw quarterly sales grow by 9.6 per cent to $491m, and was the only part of the business to show a profit.
Chairman and CEO John Eyler said: “The liquidation of inventories of several competitors contributed to lower than planned toy sales in the first quarter. We effectively improved margins and controlled expenses and inventory levels during the quarter to offset most of the impact of the sales decline in our toy and video game businesses.”
Toy R Us has not given a timetable for completing a review if its operations, announced at the start of the year, but analyst expect some store closures. The business operates more than 1,460 stores worldwide, including 681 Toys R Us stores in the US and 579 international stores, along with 200 Babies R Us stores.
