Toys R Us posts loss on costs and international weakness
NEW YORK (Reuters) - Toys R Us Inc TOY.UL, which is looking to go public, reported a quarterly loss on higher costs and weakness in its international business.
The world's largest dedicated toy retailer said its net loss was $14 million in the fiscal second quarter, compared with a net profit of $27 million a year earlier.
Sales were almost flat at $2.6 billion, while total operating costs rose 8.2 percent.
The company, which operates stores under its namesake brand and the Babies R Us and FAO Schwarz chains, said same-store sales rose by 0.6 percent in the domestic segment, while those at its international unit fell 3.2 percent.
Demand was strong for toys and seasonal categories at the New Jersey-based retailer, while sales of entertainment products like video games and related software was weak.
Toys R Us was taken private in 2005 by Kohlberg Kravis Roberts KKR.AS, Bain Capital and Vornado Realty Trust (VNO.N) in a $6.6 billion deal. It recently filed to raise as much as $800 million in an initial public offering.
The retailer is fighting a tough war against industry behemoths like Wal-Mart Stores Inc (WMT.N), Amazon.com Inc (AMZN.O) and Target Corp (TGT.N). Toymakers like Hasbro Inc HAS.N and Mattel Inc (MAT.O) are also making a bigger push to sell directly.
The latest entrants to the toy market include book store chains such as Borders Group BGP.N and Barnes & Noble (BKS.N), which recently said they would dedicate more store space to toys.
In a bid to win shoppers ahead of the key holiday shopping season, Toys R Us is opening about 600 pop-up stores in the United States this year. That is more than six times what the toy retailer opened last year. It already operates 587 full-size Toys R Us stores.
The company will also bring some cheer to the ailing jobs market by hiring about 10,000 temporary workers to staff these stores.
The company, which spent more on payroll costs and rent expenses in the latest second quarter, plans to boost its capital spending to about $396 million in fiscal 2010 as it remodels existing stores and opens new stores.
(Reporting by Dhanya Skariachan; Editing by Gary Hill and Richard Chang)
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