Sluggish Toys R Us Still Tops Profit Estimates

PARAMUS, N.J. — Toys R Us Inc. said earnings fell in its fiscal fourth quarter, which included the key Christmas holiday season, but the results beat Wall Street estimates.

The world’s largest specialty toy retailer said operating profit fell to $276 million, or $1.15 per share, from $323 million, or $1.28 a share, a year ago. Analysts had expected $1.09 a share, according to First Call/Thomson Financial. Sales rose just 2% to $5 billion, although holiday sales were down 2%.

The earnings exclude charges related to the company’s online division, which would have resulted in net income of $235 million, or 98 cents a share, down from $310 million, or $1.23.

The results cap what was described by Chief Executive John Eyler as a difficult year for the company, highlighted by Eyler replacing Robert Nakasone, problems at its online division and stiff competition from discounters.

The company said sales at its 710 U.S. toy stores were hurt by falling prices for video game consoles, as well as shortages of hot-selling toys.

Eyler said in a statement that 1999 “was a difficult year for the company, but one in which the foundation for the future was strengthened.” The company has overhauled some of its older stores into a new format meant to be more customer-friendly, and those stores are outperforming older outlets, Eyler said.

The Toys R Us Web site generated $49 million in sales in the fiscal year that ended Jan, 29, but the site had trouble meeting customer demand during the holidays.

Eyler also said Toys R Us would introduce this fall an exclusive line of stuffed animals based on the Animal Planet cable television channel. The strategy is one Eyler was familiar with at FAO Schwarz, where 70% of the toys sold were not found elsewhere.

At the company’s Kids R Us division, sales at stores open more than a year fell 3% in the year. “We are very encouraged by the success we’ve had with leveraging our Kids R Us buying expertise and infrastructure up to our combo stores,” the company said. “We expect to roll out more of these in 2000.”

For the full year, operating profit fell to $334 million, or $1.36 a share, from $376 million, or $1.41 per, on an 11% rise in sales to $11.86 billion.

Shares of Toys R Us closed up 81 cents at $11.94 on the New York Stock Exchange.