Toys R Us Posts Lower Holiday Sales

Toy sales dipped 1.4 percent during the crucial holiday sales period, Toys R Us Inc. (TOY)reported Thursday, citing tiny decreases in sales at its U.S. and international stores, as well as on the Internet.

The nation's No. 2 toy seller, which has been struggling to compete against discounters such as Wal-Mart Stores Inc. (WMT), said it won't immediately discuss whether it will pursue splitting its global toy business from its Babies R Us (search) chain, which sells baby furniture, clothes and accessories.

Wayne-based Toys R Us had said in November that it would separate the two businesses in the first half of 2005. On Thursday, Chief Executive Officer John Eyler said he expects a strategic review to be finished in the first half of the year, after which the company's board of directors will decide what steps to take.

The company said U.S., international and sales for the nine-week period ending Jan. 1 totaled $3.89 billion, down from $3.95 billion in the year-ago holiday period. Including a boost from favorable currency exchange rates, global toy sales for the 2004 holiday season totaled $3.99 billion.

Total net sales, including revenues from Babies R Us, slipped 0.9 percent to $4.29 billion for the nine weeks ending Jan. 1, 2005, compared to $4.33 billion for the nine weeks that ended January 3, 2004.

"I am pleased with the results our global toy team achieved," Eyler said in a prepared statement. "Industry sources estimate that sales of traditional toys declined by approximately 5 percent in 2004. In addition, the video game business struggled with significant hardware shortages."

For the nine weeks ending Jan. 1, Toys R Us said comparable U.S. toy store sales fell 2.2 percent, comparable international store sales were down 0.7 percent, and sales for the division fell 3.3 percent.

One bright spot was the Babies R Us division, which posted a 1.6 percent comparable store sales increase over the nine weeks.

In addition, Eyler said the company had sharply reduced inventory of discontinued and older products, and that it had a strong balance sheet and good liquidity.

Toys R Us shares fell 12 cents, to $20.30, on the New York Stock Exchange (search).