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Toys 'R' Us edges forecast
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November 13, 2000: 1:59 p.m. ET
3Q loss a penny less than expected, but sales are off from a year ago
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NEW YORK (CNNfn) - Faced with the lack of a hot toy following the end of the Pokemon craze, No. 1 U.S. toy retailer Toys "R" Us reported a third-quarter loss Monday of $65 million, or 32 cents a share, a penny better than Wall Street forecasts, but said total sales fell from a year ago.
Analysts polled by earnings tracker First Call/Thomson Financial had expected a loss of 33 cents a share. A year ago, the company, which also operates Kids "R" Us, Babies "R" Us and Imaginarium stores, earned $15 million, or 6 cents a share.
Sales for the quarter slipped to $2.2 billion from $2.5 billion a year earlier, and sales at stores open at least a year, a closely watched figure known as comparable-store sales, fell 1 percent in the quarter. That compares with a 13 percent comparable-store sales increase posted a year ago, which was driven primarily by demand for Pokemon toys.
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Basically what happened in here, the company's comp sales are responding much better than most of us thought.
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Donald Trott
retail analyst
Jefferies & Co. Inc. |
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"Basically what happened in here, the company's comp sales are responding much better than most of us thought," said Donald Trott, a retail analyst with Jefferies & Co. Inc. "My model called for comp sales to be down 7 percent. Instead they were down 1 percent versus a year ago."
Yet Toys R Us (TOY: Research, Estimates) stock soared $1.88, nearly 12 percent, to $18.32 in trading Monday chiefly because it fared better than expected against tough comparisons to a year ago when sales of Pokemon, Star Wars and Furby drove comparable-store sales up 13 percent.
In addition, CEO John Eyler said the company is "well-positioned" for the holiday season and that it expects to meet or slightly exceed fourth-quarter and full-year estimates.
"Toys "R" Us' performance in the third quarter, achieved in spite of the challenging comparison due to the Pokemon craze a year ago, clearly indicates positive trends within our core business as well as the progress we have made implementing strategies designed to support our growth now and into the future," Eyler said.
Eyler also said he is encouraged by the company's new exclusive agreement to sell E.T.-licensed toys, games, sporting goods and apparel, related to the 20th anniversary of the film "E.T.-The Extra-Terrestrial," being re-released in 2002.
Other branding initiatives include deals with Scholastic Corp. in which the children's book publisher will have "boutiques" within Toys "R" Us stores.
Excluding the impact of its Web site, Toysrus.com, the company reported net earnings of $15 million, or 7 cents a share for the quarter, compared with $26 million, or 11 cents a share in the year-earlier period.
Eyler said Toys "R" Us is nearing completion of a previously announced overhaul of 166 stores, and he expects all U.S. toy stores to be updated by the 2002 holiday season.
Trott said that new store format, which is proving successful, is also a good sign for the company.
The company also is "encouraged" by the performance of some recently launched exclusive products such as Animal Alley, Animal Planet and Home Depot in all U.S. stores.
The Babies "R" Us division posted double-digit comparable-store sales increases in the quarter, but sales at Kids "R" Us decreased in the low single-digits from a year ago. Eyler said the company will continue to integrate the Kids product lines into combination stores and Babies "R" Us stores.
The Web site, which came under fire from consumers and analysts last December for being unable to handle the crush of last minute holiday orders, has teamed up with pure play e-tailer Amazon.com (AMZN: Research, Estimates) to help with its order fulfillment.
Toysrus.com incurred a one-time charge of about $118 million as a result of closing three distribution centers and severance costs following the partnership with Amazon. 
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Toys “R” Us
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