Toys ‘R’ Us swings to Q4 profit; targets $100 to $175 million in spending cuts
Wayne, N.J. -- Toys “R” Us Inc. swung to a profit in the fourth quarter, amid a major restructuring initiative that looks to cut up to another $175 million in expenses.
“We have identified additional cost savings opportunities of between $100 million and $175 million, of which approximately two-thirds will be realized in fiscal 2015 and the balance expected to be achieved by fiscal 2016,” said Antonio Urcelay, chairman and CEO Toys “R” Us. “This brings our cumulative three year total cost savings target to between $200 million and $275 million. Right-sizing the cost structure of the company and creating operational efficiencies across our global organization will continue to be a major focus as we move forward.”
The company posted a profit of $265 million for the quarter, ended Jan. 31, compared with a loss of $210 million in the year ago period. (The year-earlier period included a $378 impairment charge.)
Net sales fell 5% to $4.98 billion.
Same store sales were down 4.5% primarily driven by declines in the entertainment, learning and seasonal categories, the retailer said.
“Our fiscal 2014 results reflect the successful execution of the initial phase of our “TRU Transformation” strategy,” Urcelay stated. “We are pleased to have delivered a strong improvement in gross margin rate, particularly in our domestic business, coupled with SG&A savings, which resulted in a 10% increase in Adjusted EBITDA and strong cash flows versus last year. Additionally, through the significant efforts of the team, we stabilized global comparable store net sales, while implementing a more disciplined approach to promotional activity and pricing.”
For fiscal 2014, the retailer reported a net loss of $292 million, much smaller than its year-ago loss of $1.04 billion. It described its year-end inventory as healthy and put its global liquidity at $1.8 billion
Toys “R” Us Inc. has 872 Toys “R” Us and Babies “R” Us stores in the United States, Puerto Rico and Guam.