Soft baby sales, stiff competition lead to Toys “R” Us Q1 losses

The global retailer, which saw its consolidated net sales fall by US$113 million to US$2.2 billion in Q1 2017, is looking to drive growth with a revamped e-commerce strategy.
June 14, 2017

Global retailer Toys “R” Us saw its consolidated net sales decrease by US$113 million to US$2.2 billion in the first quarter of 2017, largely thanks to weakness in the New Jersey-based company’s baby business as well as heightened price discounting efforts among its big-box competitors.

Operating losses for the period ended April 29 were US$54 million, an increase of US$47 million compared to Q1 2016, and adjusted earnings for the quarter were US$44 million (down from US$79 million last year). Domestic net sales for TRU’s Baby category were down 2% over last year, while the Core Toy category grew by 1.4%.

Gross margin dollars were US$783 million (down US$63 million a year ago). Consolidated same-store sales decreased by 4.1%, driven by a 6.2% decline in the company’s domestic business. International sales declined by 0.6%, resulting from weaker sales in Europe, though these results were partially offset by growth in Asia Pacific. In fact, Toys “R” Us recently announced a strengthened focus on Asia-Pacific operations, unifying its Japanese business with its ventures in Greater China and Southeast Asia.

The results come after Toys “R” Us saw its net sales dip 2.2% to US$11.5 billion in fiscal 2016. While the retailer saw a strong start to the 2016 holiday season, it faced sluggish sales in the weeks following Black Friday. Moving forward, the retailer believes several key initiatives–including an enhanced loyalty program and new capabilities in CRM–will drive growth during the second half of the year.

Perhaps the most significant initiative is the company’s revamped e-commerce strategy. Toys “R” Us recently announced a US$100-million, three-year investment to launch a new e-commerce site (fully available in July) designed to jump-start online sales. New features include a refreshed registry service, better search functionality and a faster, more responsive design. The checkout has also been condensed from five steps to two for a faster experience.

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