--Weaker demand for electronics, seasonal toys hurt sales
--Toys "R" Us has struggled to battle Amazon.com, big-box retail
rivals
--Toy-maker shares unaffected by Toys "R" Us sales weakness
(Updates throughout with additional background.)
By John Kell
Toys "R" Us Inc.'s fiscal first-quarter loss widened as the toy
retailer reported lower sales in the U.S. and abroad, hurt by
weaker demand for electronics and seasonal toys.
The retailer, which operates over 870 Toys "R" Us and Babies "R"
Us locations in the U.S. and Puerto Rico as well as hundreds of
stores abroad, has struggled as it battles online rivals such as
Amazon.com Inc. (AMZN) and other big-box retailers for a slice of
consumer pocketbooks.
Same-store sales, a key retail metric, for the quarter ended May
4 slumped 8.4% in the U.S. and dropped 5.8% abroad. That bruising
decline contrasts with the relatively healthy first-quarter sales
reports from a number of larger U.S. toy makers, including Mattel
Inc. (MAT), Hasbro Inc. (HAS) and LeapFrog Enterprises Inc.
(LF).
Toy-maker shares performed ahead of the broader market's decline
on Friday, suggesting investors weren't reading into the
results.
Toys "R" Us on Friday said the overall same-store sales drop was
primarily due to declines in the juvenile, seasonal and
entertainment categories. Soft demand in the electronics aisle hurt
Toys "R" Us during the last holiday season, though the company has
sought to sell more learning and construction toys--pockets of the
sector that have been stronger performers.
The retailer has also aimed to lure more shoppers to its stores
with a mix of exclusive merchandise, price-match guarantees and
layaway programs. It remains to be seen what strategies will be
undertaken by interim Chief Executive Antonio Urcelay, who
succeeded former CEO Jerry Storch earlier this year.
Mr. Urcelay blamed the soft sales on a challenging global
macroeconomic environment, as well as prolonged cool weather,
themes that have been cited by a number of retail executives.
Overall, Toys "R" Us reported a first-quarter loss of $111
million, wider than last year's loss of $60 million. Net sales
slipped 7.8% to $2.4 billion. A stronger dollar trimmed $67 million
from the top line in the latest quarter.
Gross margin narrowed to 37.4% from 38.2%.
Toys "R" Us was purchased in 2005 by Vornado Realty Trust (VNO)
and private-equity firms Bain Capital and Kohlberg Kravis Roberts
& Co. (KKR) for $6.6 billion. The retailer dropped plans for an
initial public offering earlier this year, amid declining sales and
heightened competition.
-Debbie Cai contributed to this article
Write to John Kell at john.kell@dowjones.com
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