Toys 'R' Us Loss Widens on Weaker Margins

Toys "R" Us Inc.'s fiscal first-quarter loss widened as the toy retailer's same-store sales decreased and margins narrowed.

Antonio Urcelay, interim Chief Executive, said soft sales were partially impacted by global economic challenges and prolonged cool weather conditions around the world, which was similar to what other retailers have faced. The continued weakness in the electronics and entertainment category also hurt revenue, he said.

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 after almost three years of withering sales and heightened competition from online players. The company in February announced that former CEO Jerry Storch would step down.

For the quarter ended May 4, Toys "R" Us reported a loss of $111 million, compared with a year-earlier loss of $60 million. Net sales slipped 7.8% to $2.4 billion.

Same-store sales declined 8.4% domestically and fell 5.8% internationally. Overall, the decrease was mainly due to lower sales in the company's juvenile, seasonal and entertainment categories.

Gross margin narrowed to 37.4% from 38.2%, primarily because of margin rate declines in certain categories.

The latest period included a foreign currency translation impact of $67 million.

Write to Debbie Cai at [e-mail]

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