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Toys 'R' Us story: flat 2Q
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August 16, 1999: 10:59 a.m. ET
Toy retailer meets Wall St. forecasts despite remodeling, Net costs
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NEW YORK (CNNfn) - Toys "R" Us Inc. Monday posted flat fiscal second-quarter earnings that met Wall Street estimates as the nation's top specialty toy retailer continued to spruce up its stores and decided to venture into cyberspace on its own.
On an operating basis, excluding costs connected with its toysrus.com e-commerce site, Toys "R" Us reported earnings of 6 cents per diluted share. That was in line with the analysts' estimate, as reported by First Call Corp., and matched the results a year earlier before a charge related to paying off debt.
Including the one-time items, the Paramus, N.J.-based retailer reported second-quarter net income of $12 million, or 5 cents a diluted share, down from $14 million, also 5 cents a share, in the same quarter a year ago.
Net sales for the quarter ended July 31 rose 9 percent to $2.2 billion. But comparable store sales -- or sales in stores open at least one year -- rose 4 percent. Global same-store sales rose 6 percent.
"They did an OK job for the quarter -- it looked like a respectable job," said Bruce Missett, an analyst at Morgan Stanley Dean Witter. "The true test comes in the holiday season -- and we don't have enough data points yet to know how well they'll do."
Robert Nakasone, Toys "R" Us chief executive officer, credited solid merchandising trends for the company's ability to overcome cost outlays for remodeling and online programs. "We are confident that the strategic initiatives we are undertaking will strengthen our business for the long term."
Toys "R" Us said it's in the midst of a broad remodeling program and said it expects to enhance 70 percent of its stores by the fourth quarter, which includes the year-end holiday shopping period.
Meanwhile, Toys "R" Us, which has been ramping up its Internet strategy amid competition from rivals such as eToys, said it discontinued its 4-month old partnership with the California venture capital firm Benchmark Capital.
Nakasone, during a conference call with analysts Monday, declined to comment about the details of the closure of that Benchmark Capital relationship. But one analyst who requested anonymity said it has the markings of a high price for that alliance.
"My first take is, they want your first child," said the analyst, referring to the attitude of many venture capital firms about Net initiatives. "If your body has 12 pints of blood, they want half of it."
Shares of Toys "R" Us (TOY), which operates 1,472 stores about half of which are in the United States, fell 1/16 to 15-1/8 in midmorning trade Monday.
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