Toys “R” Us Reports Q4, Full Year 2015
Toys “R” Us, Inc., reported financial results for the fourth quarter and full year of fiscal 2015 ended January 30, 2016. Consolidated adjusted EBITDA was $800 million for the full year, a $158 million improvement. The Domestic segment showed continued improvement in operating performance for the fourth quarter and full year and International segment same store sales grew for the eighth consecutive quarter. Since the inception of the “Fit for Growth” initiative in 2014, TRU has realized $307 million in savings, with the balance of the $325 million target expected to be achieved by the end of fiscal 2016.
“I am very encouraged by our positive consolidated same store sales in what was a very competitive marketplace,” said Dave Brandon, chairman and CEO, Toys “R” Us, Inc. “Throughout the year, and especially during the holiday season, we focused on improving our execution to deliver a positive and memorable shopping experience to our customers. We significantly improved our performance, but we can and will make further progress on our quest to achieve flawless execution in every aspect of our operations. We grew adjusted EBITDA by 25 percent by successfully executing a number of key initiatives while continuing to take advantage of the progress we’ve made to right-size our cost structure.”
Fourth Quarter Fiscal 2015 Highlights
- Consolidated same store sales were up 2.3 percent. International had growth of 3.9 percent mainly attributable to an increase in the learning category, partially offset by a decline in the entertainment category (which includes electronics, video game hardware and software). Domestic had growth of 1.2 percent over the prior-year period primarily due to an increase in the core toy and learning categories, partially offset by a decline in the entertainment and baby categories.
- Consolidated net sales were $4,853 million, a decrease of $130 million compared to the prior-year period. Excluding a $169 million negative impact from foreign currency translation, net sales increased $39 million, mainly attributable to same store sales growth in both the International and Domestic segments, partially offset by Domestic store closures.
- Gross margin dollars were $1,657 million, compared to $1,688 million for the prior-year period, a decrease of $31 million. Excluding a $60 million negative impact from foreign currency translation, gross margin dollars increased by $29 million. Gross margin rate was 34.1 percent, an increase of 0.2 percentage points versus the prior-year period. Domestic gross margin rate increased by 0.3 percentage points primarily due to a shift in sales mix away from lower margin entertainment products, partially offset by an increase in shipping costs due to higher e-commerce sales volume. International gross margin rate increased by 0.3 percentage points as a result of margin improvements associated with the learning and entertainment categories, partially offset by increased cost of U.S. dollar denominated merchandise purchases.
- SG&A decreased by $46 million to $1,143 million, compared to $1,189 million in the prior year. Excluding a $35 million favorable impact from foreign currency translation, SG&A decreased by $11 million, primarily due to a $21 million decrease in payroll expenses, partially offset by a favorable legal settlement of $12 million in the prior year.
- Operating earnings were $447 million, compared to $417 million in the prior-year period. Domestic segment operating earnings improved by $31 million, primarily as a result of SG&A savings compared to the prior-year period. Excluding a $21 million negative impact from foreign currency translation, International segment operating earnings improved by $35 million mainly as a result of an increase in gross margin dollars due to higher net sales compared to the prior-year period. Corporate overhead increased by $15 million.
- Adjusted EBITDA improved by $45 million to $574 million, compared to $529 million in the prior-year period.
- Net earnings were $276 million, compared to $265 million in the prior-year period, an improvement of $11 million.
Full Year Fiscal 2015 Highlights
- Consolidated same store sales increased by 0.9 percent due to International same store sales growth of 3.2 percent, which was driven by improvement in the learning and baby categories, partially offset by a decline in entertainment. Domestic same store sales decreased by 0.6 percent due to a decline in the entertainment and baby categories, partially offset by increases in core toy and learning categories.
- Consolidated net sales were $11,802 million, a decrease of $559 million compared to the prior year. Excluding a $571 million negative impact of foreign currency translation, net sales were up predominantly due to increases in same store sales in the International segment, partially offset by a decline in same store sales in the Domestic segment. Net sales also benefited from new stores Internationally, offset by Domestic store closures.
- Gross margin dollars were $4,226 million, compared to $4,430 million for the prior year, a decrease of $204 million. Excluding a $215 million negative impact from foreign currency translation, gross margin dollars increased by $11 million. Gross margin rate remained consistent at 35.8 percent.
- SG&A decreased by $322 million to $3,593 million, compared to $3,915 million in the prior year. Excluding a $174 million favorable impact from foreign currency translation, SG&A decreased by $148 million, primarily due to an $81 million decrease in payroll expenses, a $40 million decline in advertising and promotional expenses and a $16 million decrease in occupancy costs, predominantly as a result of Domestic store closures.
- Operating earnings were $378 million, compared to $191 million in the prior year. Domestic segment operating earnings improved by $152 million, primarily as a result of SG&A savings compared to the prior-year period. Excluding a $22 million negative impact from foreign currency translation, International segment operating earnings improved by $64 million primarily as a result of an increase in gross margin dollars due to higher net sales compared to the prior year. Corporate overhead increased by $7 million.
- Adjusted EBITDA was $800 million, compared to $642 million in prior year, an improvement of $158 million.
- Net loss was $130 million, compared to a net loss of $292 million in the prior-year period, an improvement of $162 million.
“We have an exciting and challenging year ahead of us,” said Brandon in a statement. “We believe we can continue the positive momentum we have built by executing our four strategic pillars: grow and build our brands throughout the world, create a world class experience for our customers, create a strong financial foundation, and make talent and culture a competitive advantage. I am proud of the hard work that all of our team members have put in to get us to this point and I look forward to continuing on our path forward.”
Complimentary TIA Centenary Books Available for TIA Members
Toy Industry Association (TIA) members can request complimentary copies of They Came to Play: 100 Years of the Toy Industry Association, which commemorates TIA’s 100th birthday. Written by toy expert Christopher Byrne (AKA The Toy Guy and partner in aNb Media), the book premiered at last month’s Toy of The Year Awards and chronicles TIA’s history against the backdrop of the industry’s transformation. TIA says the 125-page retrospective explores milestones and technological advances, traces the evolution of regulation, consumer culture and globalization, spotlights industry leaders, and TIA’s ongoing endeavors to promote play.
TIA says to request a complimentary copy of They Came to Play, send an email to: tia100@toyassociation.org with your mailing address. Contact Jackie Retzer (jretzer@toyassociation.org) with any additional questions.
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