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Toys R Us Loss Widens, Sales Slip

By Reuters
Published | Updated

PARAMUS, N.J. – Toys R Us. Inc., the nation's largest toy store chain, on Monday posted a wider third-quarter loss as expenses from store-remodeling and waning consumer confidence after the Sept. 11 attacks hurt results.

It was the third straight quarterly loss for the Paramus, New Jersey-based retailer, which last month lowered its third-quarter forecast. The company said that assuming its sales recover, it expects to return to profitability in the fourth quarter and meet current consensus estimates for the year.

The company's shares traded up 2.21 percent or 50 cents to $23.10 in early New York Stock Exchange trading.

Toys R Us said its third quarter net loss was $44 million, or 22 cents a share, compared with a net loss of $5 million, or 2 cents a share, a year earlier. The loss was in line with Wall Street estimates.

After the company's warning last month, analysts polled by research firm Thomson Financial/First Call widened their consensus loss forecast, to 22 cents a share from 13 cents.

In its warning, Toys R Us said the Sept. 11 attacks disrupted its business as shoppers stayed home, and it had to ditch certain advertising and promotional bids. The company said the events had a negative impact on earnings of 9 cents per share.

Toys R Us chairman and Chief Executive Officer John Eyler said in a statement that the launch of new products and the start of a new video game cycle -- following the launch of Microsoft Corp.'s Xbox and Nintendo Co's GameCube video game consoles -- could help the company boost sales in the holiday season.

He said Toys R Us now had 433 Mission Possible stores -- which feature themed areas and are set up in a racetrack format rather than the old supermarket-type layout -- after exceeding its goal of renovating 415 stores before the holiday shopping season.

``Like all retailers, we recognize the risks posed by the current environment,'' Eyler said.

``However, we believe the beginning of a new video cycle along with a host of desirable new products will generate significant excitement in the toy category,'' he added.

The toy retailer said sales in the third quarter fell to $2.18 billion from $2.22 billion a year earlier, while sales at stores open at least a year fell 9 percent.

Among its segmental highlights, it said its Internet arm, www.Toysrus.com -- operated with Amazon.com Inc. -- had operating losses of $17 million in the third-quarter, in line with its expectations, and down from $30 million in the year-ago period. The unit's sales rose to $39 million from $23 million.