Toys"R"Us, Inc. reported financial results for the first quarter ended April 30.
In a release on June 10, the Company noted details:
First Quarter Highlights - Total Company
-Net sales were $2.6 billion, an increase of 1.1 percent versus the prior year. This includes the benefit of foreign currency translation along with net sales from new locations. Comparable store net sales were down 2.1 percent in the Domestic segment and 1.9 percent in the International segment.
-The Learning Toy and Core Toy categories continued to be strong, generating net sales growth of 7.9 percent and 5.4 percent, respectively. The Entertainment category (which includes video game hardware and software) and the Seasonal category were down 6.6 percent and 2.0 percent, respectively. Internet sales continued to be strong.
-Gross margin dollars were $978 million, compared to $945 million for the prior year. Gross margin, as a percentage of net sales, was 37.1 percent, an increase of 0.9 percentage points versus the prior year with improvements in both sales mix and margin rate (in certain categories).
-Selling, general and administrative expenses ("SG&A") were $897 million, compared to $858 million in the prior year. This increase included a foreign currency translation impact of $24 million, increases related to on-going store operations, and investments in new stores, remodels, and overseas sourcing operations.
-Adjusted EBITDA1 was $107 million, compared to $125 million in the prior year. Net loss was $67 million, compared to $55 million in the prior year.
Jerry Storch, Chairman and CEO, Toys"R"Us, Inc., said, "In the first quarter, we made important investments, including preparations to open a new west coast distribution center to support the continued strong growth of our e-commerce operations, the additional conversions of our stores to an integrated format offering both toy and juvenile products, and the implementation of other key strategic initiatives. Planned increases associated with investments made during this smaller, off-peak quarter for our business will position the company well for the balance of the year and for the future. At the same time, the team focused on product differentiation and margin improvement, delivering strong gross margin growth." Storch added, "As we continue to look for ways to improve the customer shopping experience, we are committed to strengthening our multichannel capabilities, allowing consumers to shop with us anytime from anywhere."
First Quarter Highlights - Domestic Segment
-Net sales were $1,643 million, compared to $1,671 million in the prior year.
-Comparable store net sales were down 2.1 percent. Growth was the strongest in the Learning Toy and Core Toy categories, while sales in the Seasonal category were down.
-Gross margin, as a percentage of net sales, was 36.5 percent, an increase of 0.6 percentage points versus the prior year, with improvements in margin rates within the Juvenile category and sales mix away from lower margin products, predominantly in the Entertainment category.
-Operating earnings were $80 million, an increase of $4 million versus the prior year.
First Quarter Highlights - International Segment
-Net sales were $993 million, an increase of 6.0 percent versus the prior year, with a $70 million benefit from foreign currency translation and the additional net sales from new locations.
-Comparable store net sales were down 1.9 percent. Growth was the strongest in the Core Toy category, while sales in the Entertainment category were down.
-Gross margin, as a percentage of net sales, was 38.1 percent, an increase of 1.3 percentage points versus the prior year, with improvements in sales mix towards higher margin products within our Learning Toy and Seasonal categories.
-Operating loss was $8 million, compared to $2 million in the prior year.
Liquidity and Capital Spending
The company ended the quarter with cash and cash equivalents of $496 million and unused available lines of credit of $1.5 billion. Shareholder's equity was $339 million, up from $38 million last year.
The company's capital expenditure program is a key component of its long-term juvenile integration strategy, which integrates the toy and juvenile businesses into one store. During the first quarter, the company invested $58 million primarily to open new stores, convert, expand and remodel existing stores and upgrade its information technology systems and capabilities, compared to $40 million in the prior year.
New Financing Agreements
Subsequent to the end of the quarter, the company completed a new $400 million term loan. The new financing was completed on May 25, and was structured as an Incremental Joinder Agreement to the Amended and Restated Toys"R"Us Delaware, Inc. Secured Term Loan Agreement. The Incremental Joinder Agreement added a new tranche of term loans, which increased the size of the Secured Term Loan to an aggregate principal amount of $1.1 billion. The net proceeds from the new financing together with borrowings from the $1.85 billion senior secured revolving credit facility will be used to provide funds to redeem in full the outstanding Toys"R"Us, Inc. $500 million 7.625 percent Senior Notes due in August of 2011 including accrued interest, premiums and expenses. On May 26, the company provided notice to the holders of the 7.625 percent Senior Notes that it would redeem all such notes on or about June 24. The interest rate of the new term loan is LIBOR plus 3.75 percent per annum, subject to a LIBOR floor of 1.50 percent. Considering all fees and discounts associated with the issuance, the current effective rate of the new term loan is approximately 2.0 percent lower than the effective rate of the 7.625 percent Senior Notes which are being redeemed.
Further information regarding the company's financial performance in the first quarter of fiscal 2011 is presented in its quarterly report on Form 10-Q, which was filed with the Securities and Exchange Commission on June 10.
Toys"R"Us, Inc. is a dedicated toy and juvenile products retailer.
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