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Toys R Us Reports 3Q Loss

November 13, 2000

TRENTON, N.J. (AP) _ Children’s retailer Toys R Us on Monday reported a third-quarter loss of $65 million, mainly due to costs of scrapping its problem-plagued online sales site in favor of a more promising joint site with Internet retailer Amazon.com.

The results still beat Wall Street expectations, and shares rose 11 percent.

For the quarter ended Oct. 28, the Paramus-based toy and clothing retailer posted a net loss of $65 million, or 32 cents per share. Analysts surveyed by First Call/Thomson Financial were expecting a loss of 33 cents per share.

In the year-ago quarter, Toys reported a profit of $15 million, or 6 cents per share.

Excluding an after-tax charge of $80 million, or 39 cents per share, related to its Internet subsidiary Toysrus.com, Toys R Us said it would have earned $15 million, or 7 cents per share compared with $26 million, or 11 cents per sahre, in the year-ago period.

Sales were down about 10 percent, to $2.22 billion from $2.47 billion a year earlier, when the Pokemon craze kept trading cards and dozens of related toys flying off store shelves. This year, sales at the company’s U.S. stores slipped 1 percent and unfavorable foreign currency rates wiped out the 2 percent sales increase at overseas stores.

Nonetheless, shares of Toys R Us rose $1.81 to $18.25 in trading on the New York Stock Exchange.

``The quarter was better than we had expected,″ said Melissa Williams, a toy industry analyst and senior vice president at Gerard Klauer Mattison & Co. in New York. ``The sales results, up against a very difficult comparison with a year ago, I think were pretty favorable.″

John Eyler, the company’s president and chief executive officer, said Toys R Us is ``well-positioned″ for the holiday season, its biggest quarter of the year, with the new joint Web site already running well.

Last year’s holiday season was a disaster for Toys, with shortages of some toys, its online site overwhelmed by would-be buyers and many unhappy customers not getting merchandise they ordered in time for Christmas.

That led to the deal with Amazon.com announced in August. Toysrus.com now buys and manages inventory housed in seven Amazon.com distribution centers around the country; Amazon.com created and maintains the new Web site, assists customers and fills orders.

Williams said that eToys is the biggest online retailer in the business this holiday season, but ``it’s a fair assumption that Toysrus.com will be bigger than eToys next Christmas.″

Meanwhile, Toys R Us reported a profit of $153 million, or 70 cents per share, for the first nine months of its fiscal year, but that was inflated by a one-time $315 million gain from the first-quarter initial public stock offering for another subsidiary, Toys R Us-Japan.

That compares with a net profit of $44 million, or 18 cents per share, in the first nine months of the prior year. Sales fell to $6.53 billion from $6.84 billion.

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On The Net:

http://www.toysrus.com