Toys R Us Trims Quarterly Loss

Toys R Us Inc., the No. 1 U.S. specialty toy retailer, Monday reported a smaller quarterly loss, helped by the weaker dollar and sales in its Babies R Us unit.

Shares of the company, which also backed its full-year earnings forecast, rose more than 7%.

Toys R Us said its net loss narrowed to $11 million, or 5 cents a share, in the second quarter ended Aug. 2, from $17 million, or 8 cents, a year earlier.

The latest results, which were in line with Wall Street expectations, included a $6-million charge from a change in how the Wayne, N.J., company accounts for payments from vendors.

Sales increased 3.3% to $2.14 billion, but would have risen only 0.6% without currency fluctuations, Toys R Us said. A weaker dollar makes overseas sales more valuable when they are converted back into U.S. currency.

Sales at international toy stores open at least one year increased 4.2% in local currencies. Internet sales jumped 21%.

But sales at U.S. toy stores open at least a year fell 2.4%. The company attributed the decline mainly to an 18% drop in video game sales, which it expects to improve in the second half.

Sales at Babies R Us, which carries clothing, furniture, toys and strollers, rose 13% in the second quarter, and same-store sales increased 4.2%. Toys R Us opened five stores in the format in the first six months of the year and plans to open about 10 more in the second half.

“Babies R Us is successful because it offers one-stop shopping for babies,” said Jim Silver, toy expert and publisher of several trade publications.

Silver said Toys R Us needs “to figure out a way to bring the consumer in during the first nine months of the year.”

The first half of the year is weak for the toy industry as it gears up for the sales push in the third and fourth quarters, when people stock up for the holidays.

To stimulate year-round business, Toys R Us is experimenting with a new format called “Geoffrey,” which takes up 40,000 to 45,000 square feet and combines elements of Toys R Us, Babies R Us and Kids R Us. The stores include party rooms, activity centers, hair salons, photo studios and play areas.

Toys R Us shares rose 83 cents, or 7%, to $12.71 on the New York Stock Exchange.