Toys 'R' Us loses in Q3
By Staff -- Gifts and Dec, 12/19/2007 3:27:00 PM
WAYNE, N.J.—Toys “R” Us Inc. today reported a third quarter loss of $76 million, as increased selling, general and administrative costs (SG&A), and the absence of revenue from the sale of real estate, overwhelmed sales gains achieved during the period.
Net income for the quarter dropped by $117 million, the retailer said in an SEC filing this week, primarily due to increases in S&GA of $122 million as a result of increases in corporate-related, store occupancy, payroll-related and advertising expenses, as well as a $91 million decrease in net gains on sales of properties and a decrease in income tax benefits worth $13 million. Partially offsetting the declines was a $116 million increase in gross margin resulting from an overall increase in net sales. The retailer’s operating loss for the three months ended on Nov. 3, 2007, was $26 million, compared to earnings of $7 million in 2006’s Q3.
The results were a reversal from 2006’s Q3, when TRU pulled in a $41 million profit for the third quarter, on its way to what would become a financially positive year.
TRU’s companywide net sales rose 9.7 percent, or $247 million, to $2.8 billion during this year’s quarter compared to the corresponding period of 2006. $71 million of the increase was due to the effects of foreign currency translation. By comparison, TRU’s sales grew nearly 17 percent during the third quarter of 2006 versus 2005.
The company’s U.S. toy stores division recorded a 5.5 percent sales gain, to $1.04 billion, despite a 2.2 percent drop in same-store sales. The sales jump at domestic toy stores was attributed to a one-week shift in the quarter’s end, which represented $53 million of the unit’s $54 million gain over 2006’s Q3 sales figure. The decrease in same-store sales was blamed on lower sales of learning, core toys, juvenile and seasonal categories, all impacted by changes in product assortment, which was partially offset by demand for Nintendo’s Wii video game system and related accessories in the entertainment category.
International toy store sales rose 16.8 percent in 2007’s Q3 to $1.1 billion, helped by a 2 percent gain in same-store sales. Babies “R” Us’ quarterly sales grew 5.7 percent to $634 million, with same-store sales up 1.2 percent.
Through the first 39 weeks of 2007, TRU tallied a net loss of $159 million, a performance $44 million worse than where the company was at the same point in 2006.
Year-to-date through Nov. 3, the company’s overall sales were up 8.1 percent versus 2006. Its U.S. toy store division saw sales grow 2.6 percent, helped by a 1.2 percent gain in same-store sales and unspecified increases in Internet sales.
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