Strong cost cutting, weak sales at Toys"R"Us

Toys”R”Us says a planned decrease in promotions led the retailer to report a drop in same store sales in the second quarter.

The retailer singled out declines in the baby, entertainment and seasonal categories as contributing to the comp drop as well.However new CEO Dave Brandon sounded a positive tone regarding the company’s profit potential.

“In the two months I’ve been here, I have been impressed with the work done by the team to right-size the cost structure and position the company for growth,” said President and CEO Dave Brandon. “Now, the focus turns to solidifying our roadmap for the future and ensuring we have the right talent and structure in place to move quickly. I am excited to be here and confident in our ultimate success.”

For the second quarter ended Aug. 1, adjusted EBITDA grew 47%, benefited by SG&A savings from the “Fit for Growth” initiative, the company said. Net sales were $2,293 million, a decrease of $147 million compared to the prior year period. Gross margin was $875 million, compared to $916 million for the prior year period, a decrease of $41 million. Operating earnings were $15 million, compared to an operating loss of $42 million in the prior year period. Net loss was $99 million, compared to a net loss of $148 million in the prior year period, an improvement of $49 million.

Through the end of the second quarter of fiscal 2015, the company invested $82 million primarily for enhancements to information technology, store maintenance and improvements to distribution centers, compared to $86 million in the prior year period.

Toys”R”Us operates in 864 Toys“R”Us and Babies“R”Us stores in the United States, Puerto Rico and Guam, and in more than 730 international stores and over 240 licensed stores in 38 foreign countries and jurisdictions.