Toys 'R' Us mum on Q4 outlook

Expense control and a more rational promotional environment helped Toys “R” Us reduce the size of its third quarter operating loss but the company had little to say about its outlook for Christmas sales and profits.



Sales declined 1.3 percent to $2.5 billion during the quarter ended November 1, but excluding the effects of foreign currency translation sales increased 0.4%. A domestic same store sales decrease of 1 percent was offset by an international comp increase of 1 percent. Reduced promotional activity hindered sales growth, but helped gross margins and enabled Toys “R” Us to reduce its operating loss to $93 million from $140 million the prior year.



“Our attention is fully focused on the holiday season and the important fourth quarter for our business,” said Antonio Urcelay, Toys “R” Us chairman and CEO. “We believe the improvements we’ve made during the first three quarters of the year have us well-positioned to deliver an improved shopping experience for our customers, both in-store and online.”



While Urcelay didn’t share any expectations regarding fourth quarter sales growth or e-commerce inroads, he did elaborate on the company’s general operating philosophy, liquidity and financial arrangements.



“Our more disciplined approach to promotional offerings resulted in a 180 basis point gross margin improvement in our U.S. business, while at the same time providing fair pricing to our customers,” Urcelay said. “We are also pleased to have delivered the third consecutive quarter of positive comparable store net sales in our International business, where we experienced particular strength in the Asia-Pacific region. Through our highly-focused, efficient execution, we reduced SG&A costs for the quarter, and there are significant efforts underway to continue to improve our cost structure.”



The company recently refinanced $1.4 billion of near-term debt maturities, $1 billion of which matured in 2016. As a result, the company has no significant debt coming due until 2017. The company ended the quarter with $1.4 billion of liquidity, consisting of $406 million in cash and equivalents and another $1 billion of unused availability under lines of credit.



Toys “R” Us enters the holiday season with 893 stores in the U.S. and nearly 1,000 international stores and licensed locations internationally.