There isn't much to like about a $25 million quarterly loss except, perhaps, when it is stacked up against a comparable prior-year loss that was $46 million, or nearly twice as steep. That is Toys "R" Us'
Former Kids "R" Us real estate, which was purchased earlier this year by Office Depot
Same-store sales in the U.S. toy division dropped 1.7% and through the first nine months are 5% below last year's pace. Video game sales, though, which constitute about 13% of domestic toy revenues, appear to be on an upswing. After a double-digit decline in the first half of the year, sales of video game merchandise rose 2.4% during the quarter, and further growth is expected next year as a new cycle of game platforms hits the market.
U.S. toy sales fell 8.3% for the quarter to $1.1 billion, but operating losses narrowed slightly to $77 million from $79 million. Year to date, extensive inventory markdowns have caused operating income in the segment to plummet from an $81 million loss to $229 million. Elsewhere, though, things are looking a little brighter.
Toy sales have been more brisk overseas, with the international division reporting a 4.3% gain in comps (excluding currency translation), and a 5.5% increase in sales to $483 million. The same is true in the online world. Despite a contentious disagreement with former partner Amazon.com
The firm's pride and joy, though, continues to be its more profitable Babies "R" Us concept, the nation's largest baby-related specialty chain. With 10 new stores and a modest rise in comps, sales for the segment increased 5.6% to $473 million. More importantly, the segment posted a 14% improvement in operating income to $57 million.
With the company possibly courting a buyer, there is no better time than the upcoming holiday season for Toys "R" Us to pad its corporate resume. Wal-Mart
Take these toy stories off the shelf and give them a try:
Fool contributor Nathan Slaughter owns none of the companies mentioned.