Children's retailer Toys R Us Inc. on
Monday reported a 75 percent plunge in profits for its second
quarter as sales cooled and losses from its year-old Web site cut
earnings. Still, the company beat analysts' expectations by a
The Paramus-based seller of games, toys, clothing and other
items for children said net earnings for the three months ending
July 29 totaled $3 million, or 1 cent per share, beating the
break-even forecast of analysts surveyed by First Call/Thomson
Financial. A year earlier, net earnings totaled $12 million, or 5
cents per share.
Meanwhile, sales slid 9.5 percent, to $2 billion from $2.2
billion. The company said second-quarter revenues were hurt by the
lack of hot toys compared to last year, when Furby and Star Wars
items were all the rage. Although comparable store sales were up 3
percent for the second quarter outside this country, comparable
U.S. toy store sales dropped 2 percent for the quarter.
But Toys R Us, the country's top-selling toy retailer until it
was overtaken in 1998 by discounter Wal-Mart, is staying in the
game, making changes and deals to reverse its fortunes.
"Clearly, you've got a CEO who's doing a lot to try to
re-energize this company,'' said Ursula Moran, a senior retail
analyst at Sanford C. Bernstein in New York. "The preliminary
signs are pretty positive.''
Since appointing John Eyler as president and chief executive
officer in January, the company has continued remodeling stores to
improve layout and spent $449 million to buy back 31 million shares
of its stock, nearly doubling the price.
Toys R Us shares were up 62.5 cents, or 3.6 percent, to $18
Monday on the New York Stock Exchange,
Last week, the company announced plans to abandon its year-old
Toysrus.com in favor of a joint Web site with giant Internet
retailer Amazon.com, a strategy meant to make Toys' online business
profitable two years earlier.
"In one fell stroke, they eliminated a potentially very
significant competitor in the category and they gained expertise
that they don't have now,'' Moran said.
Toysrus.com lost $20 million before taxes in the second quarter,
said company spokesman Louis Lipschitz. Excluding that, the parent
company's second-quarter profit would have been $16 million, or 7
cents per share.
Eyler said significant expenses and charges from creating Toys'
joint site with Amazon.com will hurt results in the 2000 fiscal
year, but the business could become profitable in 2002.
"We will be the global leader for toys, children's and baby's
products on the Internet,'' Eyler predicted.
Meanwhile, Moran said, the company is beginning some other
alliances, including alliances with Oshkosh for exclusive baby
toys, games and plush animals and with Home Depot to make
child-sized tools, accessories and construction kits for items such
as birdhouses. The company also has a partnership with the
fast-growing Animal Planet cable TV channel to develop electronic
and other interactive toys based on wildlife, she said.
For the first six months of its fiscal year, Toys R Us reported
profits jumped 650 percent, to $218 million or 97 cents per share,
compared with $29 million or 12 cents per share a year earlier.
That included a pretax gain of $315 million in the first quarter
from the initial public offering of part of the company's Japanese
subsidiary, Toys R Us-Japan.
Excluding that gain and the Web site loss, net earnings for the
first six months would have been $40 million, or 18 cents per
Sales for the first six months totaled $4.31 billion, down from
$4.37 billion a year ago.
Toys R Us now operates 1,553 stores, including 707 U.S. toy
stores, 470 international toy stores, 201 Kids R Us clothing
stores, 137 Babies R Us stores and 38 Imaginarium stores.
On the Net: http://www.toysrus.com