Increased big-box competition and decreased momentum for videogame sales, both at home and abroad, led to continued losses at global retailer Toys ‘R’ Us, which saw a 4% drop in US sales during its crucial holiday quarter of 2013.
For the period ended February 1, the Wayne, New Jersey-based company reported net sales of US$5.27 billion – a decrease of US$503 million, or 8.7%, over Q4 2012. The US comparable store net sales drop of 4.1% was primarily due to softness in the entertainment segment, which includes electronics, videogame hardware and software, as well as within learning and juvenile categories. Quarterly net losses came in at US$210 million, compared to net earnings of US$239 million a year earlier.
It looks like the 65-year-old retailer’s massive pre-holiday measures – which included extended shopping hours – fell short during the six-week period that usually contributes roughly 40% to annual sales.
“A challenging year,” as described by Toys ‘R’ US CEO Antonio Urcelay, was characterized by an overall US$1 billion decrease in 2013 net sales – which totaled US$12.5 billion – compared to 2012. (It’s worth noting that there was one fewer week in 2013 compared to 2012.)
However, Urcelay remains optimistic, citing accelerated expansion in China and new domestic initiatives designed to put the company on-track for profitable growth. So far, the company’s US business is off to a solid start in 2014, with a 3.5% comparable store sales increase through the first seven fiscal weeks. The recent growth spurt can be attributed to learning, juvenile and entertainment categories that benefited from strong sales of movie-related products, as well as an enhanced e-commerce shipping offer.
There are currently 872 Toys ‘R’ Us and Babies ‘R’ Us stores in the US and Puerto Rico, and more than 700 international stores. With the company’s long-rumored IPO still on hold and its bond ratings in flux, industry pundits are increasingly paying attention to what an underwhelming holiday performance will mean ultimately for Toys ‘R’ Us’ long-term sustainability.