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Toys 'R' Us warns on 2Q
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July 13, 2001: 3:45 p.m. ET
Toy retailer says loss for period will be worse than current forecasts
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NEW YORK (CNNfn) - Troubled toy retailer Toys 'R' Us warned Friday its loss in the current quarter will be greater than expected and that its full-year profit, therefore, also will be less than expected.
The news sent shares of Toys R Us (TOY: down $0.47 to $24.68, Research, Estimates) down sharply Friday morning.
In a filing with the Securities and Exchange Commission, the Montvale, N.J.-based company said it now expects the loss in its fiscal second quarter, which ends Aug. 4, will be slightly greater than 14 cents a share, which it said is the worst of current forecasts. The consensus of analysts surveyed by First Call is for a loss of 10 cents in the quarter, compared with earnings per share of 1 cent in the year-earlier period.
First Call's forecast calls for EPS of $1.31 for the full-year, up from 95 cents in fiscal 2001.
The company attributed the new guidance to a "challenging economic environment and our own previously announced increased planned investment spending."
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The company also announced it placed $500 million notes through a private placement with institutional investors.
Toys R Us has been in the midst of a major turnaround. Throughout the 1990s the company struggled with outdated stores and a sagging reputation. But under CEO John Eyler, who came from privately held upscale toy retailer FAO Schwarz, Toys R Us has made a comeback, redesigning stores with wider aisles and turning to more private label brands. New stores also feature themed centers such as Animal Alley for stuffed animals.
The company's Internet division, toysrus.com, also launched a successful partnership with the world's biggest online merchant, Amazon.com, last year.
But the economic downturn has affected virtually all retailers, as mounting layoffs, high energy prices and a volatile stock market forced consumers to streamline purchases. Most retailers have had to mark down merchandise heavily to drive sales, but at the risk of reducing profit.
Analysts have said tax rebate checks due to start showing up in Americans' mailboxes by the end of July could help boost spending, but some wonder whether they will use those checks to pay off enormous credit card debt.
"The bulk of the refund checks will go toward paying off the enormous credit card debt which Americans have currently," Kurt Barnard, president of Barnard's Retail Trend Report told CNNfn's The Money Gang Friday. (WAV 459KB) (AIFF 459KB)
Analysts have said the lack of a hot "must have" toy in the last few years has added to toy retailers' woes.
Several toy companies have filed bankruptcy or gone out of business in the last year, including educational toy merchant Zany Brainy and online site eToys. 
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Toys ‘R’ Us
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