Toys R Us fiscal 1Q loss narrows on cost controls

WAYNE, N.J.

Toys R Us, the largest U.S. toy chain, said Friday that its fiscal first-quarter net loss narrowed in the fiscal first quarter, despite lower revenue, as the company kept a tight rein on costs.

The February-April quarter is the seasonally smallest for toy makers and retailers, coming after the busy Christmas season.

CEO Jerry Storch said the company improved gross margin -- the amount of each dollar in revenue a company actually keeps as profit -- by selling more profitable toys.

Toys R Us said in May 2010 that it hoped to go public with a stock offering worth as much as $800 million, but a turbulent market has delayed the process and more recently the company has stayed mum on when or if an IPO is still in the works.

Net loss totaled $60 million in the February-April quarter, from $67 million in the same period last year.

Operating expenses such as selling and administrative costs were unchanged, while the company's inventory costs fell almost 3 percent.

Revenue fell nearly 1 percent to $2.61 billion from $2.64 billion, hurt by declining demand for video games. That pulled entertainment sales down 14 percent. But sales of learning toys, like the LeapPad Explorer, a tablet like device for tots, were strong.

Toys R Us has focused on offering exclusive toys that cost more than other toys as a way to offset competition from discount stores.

Revenue in stores open at least one year, a key measure of a retailer's financial health because it excludes stores that open or close during the year, fell 0.8 percent in the U.S. and 5 percent internationally. Strong sales at locations in China and Southeast Asia were offset by weak sales in Japan.

Toys R Us, based in Wayne, N.J., has 874 Toys R Us and Babies R Us stores in the U.S. and Puerto Rico, as well as 625 international stores and 145 licensed stores. It also operates the FAO Schwarz store in New York.