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First quarter results indicate a decline in profits for ToysRUs, driven by its weak baby business.
ToysRUs reported its first quarter results for 2017 recently. Sales and profit have both declined primarily due to its baby business among other factors.
Earnings before interest, tax, depreciation, and amortization, EBITDA, came in at $44 M in the first quarter, which represented a sharp decline of roughly $35 M compared to a year ago.
ToysRUs’s gross margins came in at $783 M for the first quarter of 2017. Last year gross margin was about $846 M, so this represents a $63 M shortfall. The gross margin rate was almost thirty-six percent.
ToysRUs’s domestic gross margin rate dropped over 150 basis points because of promotions and extra inventory. In contrast, global gross margin rate stayed relatively stable compared to last year over the same period of time.
David Brandon, CEO of ToysRUs, acknowledged that ToysRUs continues to face the same challenges they had during last year’s holiday season. Furthermore, its baby business is weak as a whole, there is slow growth in the overall toy category, and competitors are aggressively discounting products. Those were the key reasons for the rather lackluster results. Brandon added that they have created many initiatives to grow the business in the second part of the year.
Previously, we had learned that ToysRUs is investing heavily in e-commerce by restructuring its online website, ToysRus.com, and they are also investing in their baby registry. By this summer, ToysRUs expects these initiatives to be fully rolled out and in place. Additionally, expect new customer relationship management software, a new and improved loyalty program, and a shops within shops strategy. All these initiatives are customer-oriented to satisfy and delight their customers and enhance the online as well as retail experience. Let’s see if these initiatives turn around this downward trend and help ToysRUs reignite positive growth again.