Toys 'R' Us pares losses despite sales drop
By Staff -- Gifts and Dec, 6/9/2009 4:02:00 PM
Sales results included a $104 million negative impact from foreign currency translation and decreased comparable store net sales, which were impacted by the overall slowdown in the global economy leading to both a decrease in transactions and a lower average transaction amount per purchase. Comparable store net sales were also affected by competitive pricing and increased promotional activity at both its domestic and international segments, moves meant to help draw additional customer traffic to TRU’s stores, the retailer said.
Domestic business
Net sales for TRU’s domestic business decreased by $88 million, or 5.1 percent, to $1.62 billion for the 13 week period. The decrease in net sales was driven downward by a dip in comparable store net sales of 5.4 percent—primarily the result of sales declines in TRU’s entertainment (video game), apparel and juvenile categories.
The sales drop in TRU’s domestic entertainment category was blamed on slowing demand for certain game systems and related accessories; an apparel category decrease attributed to the phase out of certain size offerings; and a juvenile category hurt by declines in sales of higher priced items such as baby gear, furniture and bedding, according to the company.
Partially offsetting the decreases to the juvenile category were the conversion of certain stores to the side-by-side and “R” superstore formats, and increased sales due to expanded product offerings, such as health & beauty aids and the introduction of “R” markets, the company said.
Despite the sales slowdown, operating earnings for the domestic business during the quarter rose to $106 million from $102 million in 2008’s corresponding time frame.
International business
Net sales for TRU’s international segment decreased by $154 million or 15.3 percent to $854 million.
Excluding the $104 million decrease in net sales due to foreign currency translation, international net sales decreased primarily due to a decrease in comparable store net sales of 5.4 percent. Hurting the international business’ performance was a drop in sales of video games. Helping offset the decline was an up-tick in sales of seasonal merchandise.
Overall, the retailer's international business reported an operating loss of $21 million, a result $17 million better than the one recorded in the first quarter of 2008.
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