TOYS `R' US POSTS DECLINE IN EARNINGS

LAUREN COLEMAN-LOCHNER, Staff Writer
The Record (Bergen County, NJ)
08-15-2000
TOYS `R' US POSTS DECLINE IN EARNINGS -- SALES TUMBLE WITHOUT MUST-HAVE TOY

By LAUREN COLEMAN-LOCHNER, Staff Writer
Date: 08-15-2000, Tuesday
Section: BUSINESS
Edition: All Editions -- Two Star B, Two Star P, One Star B

Internet costs and cooling sales pushed second-quarter earnings
down at Toys "R" Us.

Net income for the quarter was $3 million, or 1 cent per share,
compared with $12 million, or 5 cents per share, a year ago, the Paramus
toyseller said Monday.

Absent such hot toys as last year's bug-eyed Furby and the "Star
Wars" crew, sales for the quarter tumbled to $2 billion, from $2.2
billion a year ago. Comparable-store sales at the company's U.S. toy
stores fell 2 percent.

With no must-have products so far this year, the same-store sales
decline is no surprise, said John Taylor, an analyst at Arcadia Research
in Portland, Ore.

Currency rates hurt, too, said Louis Lipschitz, the company's chief
financial officer, but he said the company's fundamentals have improved.

"When you factor out the hits, the business is much stronger than it
was a year ago," he said.

Excluding sales at its Japanese subsidiary, revenues for the
quarter rose 1 percent, the company said. In April, Toys "R" Us sold a
32 percent stake in its Japanese unit, offering it as an IPO.

The company's Internet division, Toysrus.com, lost $13 million, or
2 cents per share, in the quarter.

Last week, Toys "R" Us announced it would partner with Amazon.com
to offer a co-branded Web site selling toys and baby goods. The company
said that alliance could make its Internet division profitable in 2002,
two years earlier than originally planned.

Comparable-store sales for its 470 international stores rose 3
percent for the quarter. At Babies "R" Us, with 137 stores,
comparable-store sales posted double-digit gains. But same-store sales
at the 201-store Kids "R" Us chain declined by mid-single digits, the
company said.

Lipschitz declined to give figures for the company's Imaginarium
stores but said they were doing "excellent," with those inside Toys "R"
Us stores posting "strong-double-digit" gains. Toys "R" Us bought Saddle
Brook-based Imaginarium last July and now operates 40 freestanding and
185 Imaginarium departments inside toy stores.

It has been an eventful month for Toys "R" Us. Besides the alliance
with Amazon, it also announced plans to open a flagship toy store,
billed as the world's largest, in Times Square.

It is also refurbishing old stores. Last year, Toys "R" Us
introduced a new, more open store format featuring expanded clothing and
electronics departments and merchandise grouped by age. The company has
been tinkering with the redesign and this year plans to convert 90 more
stores to a so-called combo format that includes more sales help and
5,000 square feet of clothing.

Sales at some of the refurbished stores have increased by 20
percent, Taylor said.

"I've felt for some time that Toys `R' Us has an awful lot of
really attractive strategic assets," he said. "I think we're starting to
see some results now on a number of initiatives that were actually begun
some time ago," such as the store improvements and a stock buyback
program that has repurchased 31 million shares so far this year.

Keywords: TOY. STORE. STOCK. INCOME. FINANCE

Copyright 2000 Bergen Record Corp. All rights reserved.