By Nathalie Tadena
Toys "R" Us Inc.'s fiscal third-quarter loss widened as the toy
retailer recorded higher interest expense and weaker same-store
sales.
Chairman and Chief Executive Jerry Storch said the company
continues to focus on improving margins while managing inventory
levels and reducing expenses, which has allowed the company to
record stronger operating earnings in the U.S. for each quarter of
this year. However, he noted that the challenging economic
environment in Europe and Japan continues to have a negative impact
on operating earnings internationally, partially offset by strength
in China and Southeast Asia.
Toys "R" Us was acquired in 2005 by Vornado Realty Trust (VNO)
and private-equity firms Bain Capital LLC and Kohlberg Kravis
Roberts & Co. for $6.6 billion. The toy retailer has made a
number of investments to position itself for future growth,
including the expansion of its e-commerce business and store
conversions to integrate products.
For the quarter ended Oct. 27, Toys "R" Us reported a loss of
$105 million, compared with a year-earlier loss of $93 million.
Sales slipped 3.4% to $2.6 billion.
The company said the latest period's sales decline was primarily
due to lower same-store sales and a foreign currency translation
impact of $30 million.
Same-store sales decreased 4.1% domestically, partially due to
the impact of this year's earlier layaway program, and fell 4.6%
internationally, reflecting weakness in Europe and Japan.
Gross margin widened to 37.1% from 36.5%.
Interest expense increased 27% to $135 million.
Sales in the company's learning category improved 1.3%. Sales in
the entertainment category, which includes electronics and
videogame merchandise, slid 7%, reflecting ongoing weakness in the
global videogame business.
Write to Nathalie Tadena at nathalie.tadena@dowjones.com.
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