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Toys 'R' Us reaffirms
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January 10, 2002: 2:22 p.m. ET
No. 2 toy retailer cites 2% holiday sales gain; investors aren't impressed.
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NEW YORK (CNN/Money) - Toys 'R' Us. Inc. reaffirmed its estimates for fiscal 2001 earnings estimates Thursday after reporting a 2 percent increase in sales at stores open at least a year during the holiday period.
However, the news was not enough to move investors, who sold off the stock, sending it tumbling more than 5 percent in afternoon trading Thursday.
The Paramus, N.J.-based No 2 toy retailer behind Wal-Mart Stores Inc. said it anticipates fiscal 2001 earnings in line with the 93 cents a share forecast of analysts surveyed by earnings tracker First Call.
Toys 'R' Us (TOY: down $1.38 to $20.72, Research, Estimates) cited the popularity of new video game consoles and game titles for driving sales in the holiday period. However, markdowns necessitated by the sluggish economy put pressure on profit margins.
"Margin pressures were intense in the fourth quarter due to the weighting of video products in our sales mix as well as the highly promotional retail environment," CEO John Eyler said. "These pressures will ease somewhat as the current video cycle matures,"
The company expects to reduce inventory by about $200 million for the current fiscal year in its U.S. toy stores. 
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