Dive Brief:
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Toys 'R' Us Inc. on Tuesday said third quarter revenue fell 2.3% to $2.28 billion, compared to $2.33 billion in the same quarter last year, driven by softness in the entertainment category.
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Q3 same-store sales decreased 2.1%; those sales fell 1.9% in the U.S. and 2.5% overseas. Increases in basket size helped offset declines in the number of transactions, the company said. Excluding entertainment, same-store U.S. toy sales were up 2.6%, and consolidated e-commerce sales rose 9%.
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The recent $45 million sale of its iconic FAO Schwarz toy unit to ThreeSixty Group mitigated the quarter’s operating losses, which were $31 million, a decline of $23 million compared to the prior year period.
Dive Insight:
Toys 'R' Us' report didn’t indicate how holiday sales were shaping up, but chairman and CEO Dave Brandon said many of the retailer’s toy categories performed well in the third quarter. “[W]e experienced weak market conditions in the electronics and entertainment category and our baby business had a disappointing quarter,” he said in a statement.
Brandon reiterated the company has more to do. "To be a successful specialty retailer, we must bring our stores to life and provide a world-class shopping experience for our customers,” he said. “Our results this quarter are a reminder that we still have a lot of work to do in all aspects of our operations — both bricks and mortar stores and our webstore. However, our commitment to achieving our growth objectives is stronger than ever.”
Those efforts, plus the debt restructuring Toys 'R' Us has undertaken, bode well for the near future, provided it can protect its margins during the holidays, according to Moody’s lead retail analyst Charlie O’Shea, who added that Q3 was slightly better than the year ago period.
“Combining this with the myriad refinancings that have taken place over the past year, which clear the maturity runway for an extended period, actually puts the company on fairly strong footing as the holiday season progresses," O'Shea wrote in an email to Retail Dive. "As we head into the holiday home stretch, promotions and in-stock positions need to remain disciplined to ensure Toys ['R' Us] maximizes profit margins and therefore profitability.”
