For the second consecutive quarter, Toys “R” Us has delivered positive comparable store net sales results in its U.S. and international segments.
After several years of market weakness, the company’s international business as whole has begun to rebound, driven primarily by net sales increases in Japan and the U.K. Business in China and Southeast Asia remains strong, as the company continues its expansion in that region.
Total net sales for the second quarter ended Aug. 2 increased by 2.7%, driven by comparable store net sales growth of 1.5% domestically and 2.5% internationally.
“We are pleased with the improvement in our Adjusted EBITDA for the quarter as we continue to take the prudent and necessary steps to strengthen the foundation of our business,” said Antonio Urcelay, chairman of the board and CEO. “During the second quarter, we completed the inventory clearance effort in our U.S. stores which began at the start of the fiscal year. While this resulted in a decline in margin rate in the interim, we believe it has significantly improved the overall health of our inventory and has us well-positioned for the influx of hot new products as we approach the holiday selling season. The actions we have taken during the first half of the year in implementing our TRU Transformation strategy, including strengthening our in-stock position, optimizing our inventory, implementing a clearer pricing strategy and simplifying promotions, should result in a much-improved shopping experience for our customers in the important months ahead.”
The company’s domestic comparable store net sales increase of 1.5% was primarily driven by increases in the core toy, learning and entertainment (which includes electronics, video game hardware and software) categories. International comparable store net sales were up 2.5% primarily due to increases in the core toy, learning and seasonal categories.
The company narrowed its operating loss, which was $42 million for the quarter, compared to an operating loss of $46 million in the prior year. Domestic segment operating earnings were $25 million lower primarily due to the inventory clearance efforts, while the international segment operating performance improved by $14 million primarily due to higher gross margin dollars, partially offset by an increase in SG&A.
Toys “R” Us operates 877 Toys “R” Us and Babies “R” Us stores in the United States and Puerto Rico. It also operates more than 710 international stores and more than 190 licensed stores in 35 foreign countries and jurisdictions.