Toys"R"Us reported financial results for the second quarter ended July 30, 2016. Consolidated same stores sales increased by 0.5% and operating earnings improved to $18 million from $15 million.
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In addition, the company successfully reached an agreement to refinance all of its Toys"R"Us 2017 notes and a portion of its 2018 maturities.
Consolidated same store sales increased 0.5%. International grew by 1.2%, driven by strength in the Canada and Asia Pacific markets.
Domestic same store sales were flat with improvements in the seasonal and core toy categories, offset by decreases in the entertainment and baby categories. Domestic e-commerce sales were up 15%.
Consolidated net sales were $2,282 million, a decrease of $11 million compared to the prior year period. Excluding a $13 million favorable impact from foreign currency translation net sales declined by $24 million.
The decrease was mainly attributable to Domestic store closures, which included the last FAO Schwarz store and our Times Square flagship store, partially offset by International same store sales growth.
Gross margin dollars were $862 million, a decline of $13 million compared to the prior year period. Excluding a $4 million favorable impact from foreign currency translation, gross margin dollars decreased by $17 million. Gross margin rate was 37.8%, a decrease of 40 basis points.
Domestic gross margin rate declined by 70 basis points, primarily due to an increase in e-commerce sales coupled with lowering our free shipping threshold. International gross margin rate remained consistent with prior year.
SG&A was $783 million, a decrease of $13 million compared to the prior year period. Excluding a $3 million unfavorable impact from foreign currency translation, SG&A decreased by $16 million, largely due to a decline in flagship store occupancy costs.
Operating earnings were $18 million, compared to $15 million in the prior year period. Excluding a $2 million favorable impact from foreign currency translation, International segment operating earnings improved by $11 million, mainly due to an increase in gross margin dollars and a reduction in operating expenses.
Domestic segment operating earnings declined by $18 million, mainly as a result of reduced gross margin dollars. Corporate overhead decreased by $8 million.
Adjusted EBITDA for the quarter decreased by $1 million to $121 million, compared to $122 million in the prior year period.
Net loss improved by $4 million to $95 million, compared to $99 million in the prior year period. ■