Sales at Toys "R" Us Inc.'s domestic stores fell in December, as
weaker demand for electronics and an uncertain economic climate
hurt the retailer during the critical shopping season.
The company, which operates 876 locations in the U.S. and Puerto
Rico, reported same-store sales dropped 1.8% in December. The
decline was attributed to weak demand in the entertainment
category, which includes electronics and videogame hardware and
software.
Internationally, same-store sales dropped 3.5% in December due
to weakness in Europe and Japan.
Soft demand in the electronics aisle had been a concern Toys "R"
Us flagged early in the holiday season, though the company was
hopeful it could overcome the weakness in demand for gaming
electronics by selling more learning and construction toys.
Chairman and Chief Executive Jerry Storch said he believed
results were also hurt by an uncertain economic environment in the
U.S. and abroad. Mr. Storch, in a prepared statement, said the
learning toy category had the strongest performance in the U.S.
Toys "R" Us had sought to combat the cyclical decline in toy
demand by aiming to lure more shoppers to its stores with a mix of
door-buster deals, exclusive merchandise, price-match guarantees
and layaway programs. The company was mainly battling other large
big-box retailers and online rivals like Amazon.com Inc. (AMZN) for
a bigger slice of consumer pocketbooks.
The weaker sales results weren't surprising, as industry sales
data showed toy sales declined throughout 2012. The toy industry
has been challenged by a weak macroeconomic environment, but also
the threat of mobile device play that is competing with physical
toys. As a result, toy makers like Mattel Inc. (MAT) and Hasbro
Inc. (HAS) have sought to address the trend by developing toys,
including a Hot Wheels car and Monopoly board, that interact with
the iPad.
Toy maker shares fell in after-hours trading, with LeapFrog
Enterprises Inc. (LF) down 1.2%, Mattel down 0.4% and Hasbro
slipping 0.8%.
Observers were keenly watching the performance of Toys "R" Us,
Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT), as those three
retailers contribute roughly two-thirds of annual sales for many
top toy manufacturers.
When adding in November's results, which were hurt by superstorm
Sandy, Toys "R" Us's quarter-to-date same-store sales dropped 4.5%
in the U.S. and fell 5.6% abroad. The international results were
partially hurt by a stronger dollar. Toys "R" Us said China, Canada
and Southeast Asia had the best performance, offset by weakness in
Europe and Japan.
Toys "R" Us was acquired in 2005 by Vornando Realty Trust (VNO)
and private-equity firms Bain Capital LLC and Kohlberg Kravis
Roberts & Co. for $6.6 billion.
Write to John Kell at john.kell@dowjones.com
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