Toys “R” Us reported a 4% same store sales increase during the first quarter, a surprisingly strong figure given the weather related challenges cited by other retailers who experienced weak sales.
Sales for the quarter ended May 3 increased 2.9% to $2.5 billion and were driven by strength in the learning, entertainment and core toy categories. Despite the sales improvement at the company’s 879 U.S. and 705 international stores, the company reported a $196 million net loss compared to a prior year loss of $111 million. The primary reasons for the loss were a $71 million decrease of an income tax benefit and a $31 million increase in expenses.
“We are pleased to have delivered positive comparable store net sales results in both our U.S. and International segments during the first quarter of the year,” said Antonio Urcelay, Toys “R” Us chairman and CEO. “As we continue to work to improve operating margins, we have begun the process of developing a clearer pricing strategy, while simplifying and optimizing our promotional offerings.”
First quarter profits were negatively affected by an aggressive inventory clearance effort, which likely helped the comp performance, the company said it began in U.S. stores to position it for the holiday season. However, overall inventory levels rose as the company focused on improving the in-stock levels.
“As we continue to work to identify areas for cost structure improvement, we incurred certain upfront costs which increased our operating expenses during the first quarter. However, we believe these short-term costs will benefit the business in the long-term,” Urcelay said. “At the same time, we made capital investments in areas consistent with our strategic priorities, including global e-commerce, U.S. store maintenance and international growth.”