NEW YORK (CNN/Money) - Troubled Toys R Us, in the midst of a major restructuring, reported a wider second-quarter operating loss Monday, while CEO John Eyler appeared to play down speculation the company will stop selling toys altogether.

Toys R Us earlier this month announced the company was exploring a possible sale of its global toy division as well as spinning off its Babies R Us unit as part of an ongoing strategic review of its business.

The news sparked much speculation among industry watchers that the company was looking to remove itself from its traditional toy-selling business.

However, Eyler indicated to analysts Monday during the company's earnings call that he believes toys could still be a viable business for Toys R Us.

"There has been significant media focus on the sale of our toy business," said Eyler. "While that is a possibility, our focus remains on running the business. Our U.S. business is profitable and is generating cash."

Added Eyler, "We're clear that there is demand in the market for a specialty toy retailer and we're trying to answer that demand."

Toys R Us declined to hold a question and answer session with industry analysts, a move that caused some consternation among analysts.

"I'm not sure why they didn't have the Q&A session today or even a conference call with analysts when they first announced the restructuring," said Sean McGowan, analyst with Harris Nesbitt.

"It signals that there's still a lot more to find our about what's going on. Given that they are underscoring the liquidity of each unit, maybe they will hang a 'For Sale' sign on the entire business."

Toy retailers, including Toys R Us, have struggled to recover from last year's brutal price war launched by discounters Wal-Mart (WMT: Research, Estimates) and Target (TGT: Research, Estimates) during the industry's key holiday shopping season.

Early this year, Toys R Us shut 102 out of 146 Kids R Us stores and all 36 of its Imaginarium stores.

Eyler declined to discuss details of the company's strategic review of its business, saying that more information would not be available for "a couple of months."

Additionally, no mention was made of further store closings in the future. The retailer ended the quarter with $1.1 billion in cash and inventories declined 14 percent over the same period a year earlier.

The Wayne, N.J.-based Toys R Us posted an operating loss, excluding a special tax credit, of $139 million, wider than the $11 million reported a year earlier.

Including a $200 million gain on the reversal of income tax reserves in past years, Toys R Us posted a net profit of $61 million. On a per share basis. earnings in the latest quarter were 28 cents a share, compared with the year-earlier loss of 5 cents.

In a note to clients Monday, Merrill Lynch analyst Danielle Fox estimated that excluding one-time items, Toys R Us earned 3 cents a share for the quarter, noting that higher than anticipated gross margin contributed to the upside to the bottomline.

Revenue came in at $2 billion, in line with Wall Street estimates, but down 3.9 percent from $2.1 billion for the second quarter of 2003.

Sales at stores open at least a year fell 7.7 percent at its U.S. toy division in the second quarter, but rose 1.8 percent at Babies R Us and were up 1.7 percent at its international division.

"Our plans for all of our stores are in place, and the steps we are taking to clear selected older inventory will further improve the appearance of our stores and allow us to provide an even better showcase for offering the widest assortment of toys available to our guests in each and every Toys R Us store as well as on Toysrus.com," Eyler said in a statement.

In its earnings call with analysts, chief financial officer Ray Arthur said Toys R Us' capital expenditure is expected to be "at or below" last year's levels, while capital expenditure at its global unit would be "significantly below" the last year's figure.