UPDATE 1-Higher interest expense, weaker sales hurt Toys R Us

Fri Dec 7, 2012 3:49pm EST

By Dhanya Skariachan

NEW YORK Dec 7 (Reuters) - Toys R Us Inc reported a wider third-quarter net loss on Friday as the world's largest dedicated toy retailer was hurt by weaker sales and higher interest expense.

The New Jersey-based retailer, which operates stores under its namesake brand and the Babies R Us and FAO Schwarz labels, said its net loss widened to $105 million in the quarter, ended Oct. 27, from $93 million a year earlier.

Sales fell 3.4 percent to $2.6 billion, while interest expense rose by $29 million to $135 million.

The increase in interest expense was mainly due to the issuance of the senior notes due fiscal 2017, and the repayment of the outstanding principal amount on its senior notes due fiscal 2013, the company said in a statement.

Same-store sales fell 4.1 percent in its domestic unit, while those at its international segment fell 4.6 percent as economic weakness in Europe and Japan hurt demand.

The company tied the sales weakness in its U.S. unit on fewer promotional events and this year's earlier layaway program. Retailers do not book layaway sales until they are fully paid for.

Toys R Us was taken private in 2005 by Kohlberg Kravis Roberts, Bain Capital and Vornado Realty Trust in a $6.6 billion deal. The stakes are high for the retailer this holiday season as it has yet to return to being a public company after filing for an initial public offering in May 2010.

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