Toys R Us Earnings Drop 75 Percent
By Monica Summers Aug 14 10:30am ET
NEW YORK (Reuters) - Toys R Us Inc. (TOY.N), the largest U.S. toy retailing chain,
on Monday said second-quarter profits fell about 75 percent from a year earlier,
dragged down by the company's struggling online business.
Toys R Us said net income fell to $3 million, or 1 cent a share, from $12 million, or 5
cents a share, in the 1999 second quarter. Sales declined about 9 percent, to $2
billion from $2.2 billion a year ago.
Analysts had expected Toys R Us to break even for the quarter, according to First
Call/Thomson Financial, which tracks earnings forecasts.
Excluding losses related to the company's Toysrus.com Internet subsidiary, which has
been somewhat of a thorn in the company's side since the 1999 holiday season, net
earnings for the second quarter were $16 million, or 7 cents a share, Toys R Us said.
President and Chief Executive John Eyler said the company's new alliance with
Amazon.com, the Internet retailing giant, could boost the Internet business to
break-even by the fourth quarter of 2001 and to profitability by 2002.
Shares of Toys R Us were up 5/8 at 18 in morning trading on the New York Stock
Exchange.
``We are very pleased by our results in the second quarter,'' Eyler said in a statement.
``Despite the lack of hot toys that drove sales in the year-ago period, we reported
strong revenues, thereby indicating the strength of our underlying core business.''
U.S. ``same-store'' sales -- sales at stores open at least a year -- fell 2 percent in the
second quarter. International same-store sales rose 3 percent, as stores in France
continued to report double-digit gains and stores in Britain reported low-single-digit
gains.
Toys R Us last week inked a deal with Amazon.com Inc. (AMZN.O) to develop an
online toy and video games store and an online baby products store.
``The strategic alliance of Toysrus.com with Amazon.com... will provide measurable
benefits to customers, which is the primary focus of both companies,'' Eyler said.
He said he expects significant short-term charges and expenses related to moving the
Toysrus.com operations into the new joint Internet site. These costs will be recorded
during the current fiscal year.
``By combining our brand name and merchandising expertise with Amazon's proven
Internet expertise and distribution capability, we will be the global leader for toys,
children's and babies' products on the Internet,'' he added.''
Excluding Toysrus.com results, Toys R Us expects to meet or beat analysts' earnings
estimates for the full fiscal year 2000, Eyler said.
Earlier this month, the Paramus, N.J.-based company said it plans to build the world's
largest toy story in New York's Times Square. The 101,000-square-foot store,
complete with a 60-foot Ferris wheel, is scheduled to open in the summer of 2001 and
is expected to draw more than 20 million visitors annually. It will be located on
Broadway between 45th and 44th streets.
``Customers visiting this store will not only be awed by the kids' universe we are
creating but also by the results of the tremendous progress we are making in focusing
our range of product offerings, revamping our merchandise presentations and
dramatically improving service levels,'' Eyler said. |
