Toys 'R' Us records loss in 2013 as margins squeezed

Toys "R" Us Inc. had a net loss of $210 million US in its fourth quarter and $1 billion US for all of 2013, after struggling to compete with Wal-Mart stores and online retailer Amazon.

Big toy retailer lost money in critical holiday period as sales declined

Shoppers snap up bargains in Toys 'R' Us store on American Thanksgiving Day in Meridian, Idaho. The rest of the holiday season was not so strong for the retailer and same-store sales fell by 3.5 per cent. (Darren Oswald/Associated Press)

Toys "R" Us Inc. reported a net loss of $210 million US in its fourth quarter and $1 billion US for all of 2013, after struggling to compete with Wal-Mart stores and online retailer

That compared to net earnings of $239 million US in the prior year, and capped a year of challenges for the privately held retailer.

Same-store sales, a key indicator of a retailer’s health, were down 4.1 per cent in the U.S. and 2.2 per cent internationally in the fourth quarter, including the critical holiday season.

There was a decline in sales of entertainment toys, including electronics, video game hardware and software, and the store's learning and juvenile categories which include baby toys.

“It was a challenging year, with declines in both our domestic and international segments,” CEO Antonio Urcelay said in a statement to investors. 

“The U.S. business experienced the more significant downturn, primarily due to a decrease in net sales, margin pressure and one-time items, including the write-down of excess and obsolete inventory as we take the necessary and prudent steps to improve the business.”

Toys "R" Us wrote down $51 million in inventory in the U.S. after being unable to sell it.

Net sales were $5.3 billion, a decrease of $503 million or 8.7 per cent compared to the previous  year. 

Urcelay said the toy retailer is developing a strategic plan to deal with the increased competition and squeeze on margins. Like other big-box stores such as Staples, it may be forced to close its expensive retail space in some markets and concentrate on online sales.

The only bright spot was China, where the chain is expanding as increasingly affluent Chinese have more disposable income to spend on their children.

Results look a little better early in 2014, with a 3.5 per cent increase in same-store sales in the U.S. as families buy more toys linked to popular movie franchises.

For all of 2013, Toys "R" Us had net sales of $12.5 billion, a drop of $1 billion or 7.4 per cent from the previous year.


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