CEO disappointed with Toys"R"Us net loss of $624 million
Staff Writer |
Toys"R"Us reported financial results for the third quarter of fiscal 2017, which ended October 28, 2017.
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"Our results for the quarter were disappointing. They not only reflect the broad competitive trends across retail, they demonstrate the continued challenges we face in both the baby and learning categories.
"Though we continue to see growth in our core toy category, we recognize the need for change in order to better meet customers’ ever evolving shopping preferences," said Dave Brandon, chairman and chief executive officer.
Net sales were $2,018 million, a decrease of $89 million compared to the prior year period. Excluding a $6 million negative impact from foreign currency translation, net sales declined by $83 million largely attributable to a decline in same store sales most notably in the baby category.
Partially offsetting the decrease was an increase in consolidated e-commerce sales.
Consolidated same store sales decreased by 4.4% driven by a 7.0% decline domestically, offset by a 0.4% increase within International Ex. Canada, as a result of growth in Asia.
Gross margin dollars were $644 million, a decline of $113 million compared to the prior year period. Gross margin rate was 31.9%, a decrease of 400 basis points. Domestic gross margin rate declined by 580 basis points, due to a reduction in vendor allowances as a result of the Chapter 11 filing as well as an increase in promotions and our competitive pricing strategy. International Ex.
Canada gross margin rate declined by 130 basis points due to an increase in promotions.
SG&A was $798 million, an increase of $13 million compared to the prior year period. The increase in SG&A was primarily due to an increase in advertising expenses and restructuring advisory fees, partially offset by expense reduction initiatives.
Operating loss was $208 million, compared to $40 million in the prior year period. Domestic segment operating loss increased by $95 million due to a reduction in gross margin dollars. International Ex. Canada operating earnings decreased by $20 million. Corporate overhead increased by $53 million primarily due to the gain in third quarter 2016 on the sale of the FAO Schwarz brand.
Adjusted EBITDA for the quarter was negative $97 million, compared to positive $5 million in the prior year period.
Reorganization items, net1 of $334 million consist of expenses and gains and losses that directly relate to the restructuring process.
The above results produced a Net loss of $624 million, compared to $160 million in the prior year period. ■