Toys R Us finds playtime tough
Toy retailer sees profits tumble
March 3 2004
Toys R Us saw quarterly profits fall over the crucial Christmas period, hit by strong competition as well as low video game sales in a market waiting for new hardware.
The US retailer has reported net profit of $144m for the three months to January 31, compared with $278m a year ago.
US same-store sales fell 5.1 per cent, mainly due to a 22 per cent drop in video game sales. International stores, including the UK operation, saw flat like-for-like sales. Overall, quarterly sales rose 1.4 per cent to $4.94bn. Sales for the full year were flat at $11.57bn.
Toys R Us has already said it found the Christmas period ‘extremely difficult’ on its home territory. Wal-Mart, the only US retailer to sell more toys than Toys R Us, led the pack of general retailers discounting toys to attract customers.
Rival US toy retailers FAO Inc, owner of FAO Schwarz, and KB Toys have both filed for bankruptcy since Christmas, citing tough competition.
Toys R Us also said the lack of new games hardware hit video game sales. The next major new launch, Sony’s handheld PSP, has been postponed until next year in both the US and Europe.
Toys R Us hired bankers Credit Suisse First Boston to advise on a strategic evaluation of all assets and operations in January. The company said the review will take a “number of additional months of work”, but has already announced the sale of its former Kids R Us stores to Office Depot for $197m.
The market is also expecting the closure of some underperforming US toy stores, balanced by expansion of the Babies R Us chain and the international operation.
John Eyler, chairman and chief executive, said: “We are committed to an exhaustive and thorough review of all of the assets of the corporation, including all real estate. Our solid financial footing gives us increased flexibility as we conduct our strategic evaluation of our company and its assets.”
