Toys “R” Us earnings fall US$8 million in 2016

Softness in the Entertainment category, as well as declines in the Asia-Pacific market, saw the retailer’s net sales drop 2.2% to US$11.5 billion in 2016.
April 13, 2017

Global retailer Toys “R” Us saw its net sales dip 2.2% to US$11.5 billion in fiscal 2016, due to softness in the company’s Entertainment category, the closure of domestic stores (including its Times Square and FAO Schwarz flagships) and declines in European and Asia-Pacific markets.

Same-store sales for the full-year period ended January 28 were down 1.4%, largely thanks to a 1.8% decline in the Entertainment sect last year. This drop was partially offset by growth in domestic toy categories, including Seasonal (up 0.7%), Core Toy (up 0.8%) and Learning (up 0.7%). Also seeing considerable gains was the company’s e-commerce division, which saw sales grow by 11% for the full year.

Internationally, same-store sales declined by 1.6%, despite experiencing growth in Canada. In addressing continued softness in its Asia-Pacific markets, Toys “R” Us recently announced it is consolidating its businesses in Japan, Greater China and Southeast Asia as part of a joint venture with Fung Retailing Limited.

Operating earnings for fiscal 2016 were US$460 million compared to US$378 million last year, an increase of 22%. International segment operating earnings improved by US$52 million due to a reduction in operating expenses, while domestic segment operating earnings declined by US$70 million as a result of reduced gross margin dollars.

Overall, adjusted earnings for the year were US$792 million, compared to US$800 million in 2015. In Q4 specifically, adjusted earnings declined by US$3 million to US$571 million.

The fourth quarter also saw net sales decline US$192 million to US$4.6 billion. Consolidated same-store sales were down 3% in Q4 2016, with domestic sales decreasing 2.3% and international ones seeing a 4.2% drop. These declines were also largely attributed to softness in the Entertainment (down 2.3%) and Baby (down 0.3%) categories. (Both of these divisions reported sales declines in Q3 2016, too.)

According to Toys “R” Us CEO Dave Brandon, the retailer saw a strong start to the 2016 holiday season, but faced sluggish salesand intense promotional activityin the weeks following Black Friday.

Operating earnings for Q4 2016 were US$480 million compared to US$447 million the year before. Toys “R” Us also reports that the US$26 million growth in international segment operating earnings was offset by a US$39-million decline in domestic segment operating earnings in the fourth quarter.

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