TRU Reports Q4 and 2010 Results
Toys “R” Us, Inc., reported financial results for the fourth quarter of fiscal year 2010 ended January 29, 2011. For the fourth quarter, the company reported net sales of $6 billion, adjusted EBITDA of $802 million, and net earnings of $330 million.
“We are very pleased with our solid performance in the fourth quarter of fiscal 2010,” said Jerry Storch, chairman and CEO, TRU in a statement. “Our authority position in the toy and juvenile products categories was clear and we believe we gained market share in the domestic toy category while delivering positive global net sales growth of 2 percent and a 1.6 percent increase in adjusted EBITDA for the quarter.”
He added that TRU has made important investments in the future, including the expansion of the e-commerce presence in international markets, increased levels of service in the stores, and the opening of a sourcing office in Shenzhen, China which will further enable TRU to differentiate its product assortment.
Fiscal Highlights for TRU include the following:
- Net sales were $6 billion, an increase of 2 percent compared to the prior year, due to new locations including TRU Express stores and comparable store net sales growth of 1.8 percent in the domestic segment. E-commerce sales growth was particularly strong. These increases were partially offset by a decline of 3.7 percent in comparable store net sales in the international segment and a minimal impact from negative foreign currency translation.
- The core toy and learning categories were the strongest in the quarter, generating net sales growth of 6 percent and 3.5 percent, respectively. The entertainment category (which includes video game hardware and software) was the weakest, declining 7.5 percent. Excluding the entertainment category, net sales were up 4.4 percent in the quarter.
- Gross margin, as a percentage of net sales, increased to 34.1 percent, a 0.2 percentage point improvement versus prior year, driven by sales mix shift away from lower margin products. Gross margin dollars increased by $47 million versus prior year including a minimal impact from negative foreign currency translation.
- Selling, general, and administrative expenses were $1,272 million, compared to $1,222 million in the prior year. A significant driver of this increase was the incremental expense associated with new locations including the TRU Express stores and new traditional stores.
The full-year fiscal 2010 highlights include net sales that were $13.9 billion, an increase of 2.2 percent compared to prior year, due to new locations, comparable store net sales growth of 1.7 percent in the domestic segment and a foreign currency translation benefit of $93 million. These increases were partially offset by a decline of 3.1 percent in comparable store net sales in the international segment.
The company converted or relocated 81 stores to either side-by-side or “R” Superstore formats and opened eight new side-by-side stores. Over 20 percent of the company’s stores are now in one of the company’s integrated formats offering both toy and juvenile products.
The core toy and juvenile categories were the strongest categories for the year, generating net sales growth of 6.2 percent and 3.3 percent, respectively. The entertainment category (which includes video game hardware and software) was the weakest, declining 9.6 percent. Excluding the entertainment category, net sales were up 4.3 percent for the year.
Adding the fourth quarter results to the prior three previously disclosed quarters, net earnings for the full year were $168 million. The vast majority of the change from last year’s $312 million was due to either one-time items or items other than operating income. Over half of the net earnings decrease was driven by non-comparable items between the two years (the Amazon.com litigation gain in fiscal 2009, litigation settlement expenses in fiscal 2010, a non-cash prior-period lease accounting charge in fiscal 2010, write-offs of deferred financing fees related to refinancing debt in fiscal 2010, and a decline in benefits from discrete income tax items in fiscal 2010). Increased interest expense largely from debt refinanced in fiscal 2009 also contributed significantly to the reduction in net earnings. The remainder of the difference was due to the slight decline in adjusted EBITDA and the slight increase in depreciation.
LEGO Announces Strong Financial Results
LEGO announced that its global market share rose from 4.8 percent at the end of 2009 to approximately 5.9 percent at end 2010.
- Profit for the year before tax increased to $915 million (DKK 4,889 million) compared with $540 million (DKK 2,887 million) in 2009.
- Net profit for the year increased to $696 million (DKK 3,718 million) compared with $412 million (DKK 2,204 million) in 2009.
- Revenue increased by 37.3 percent to $2.9 billion (DKK 16,014 million) from DKK $2.18 billion (11,661 million) in 2009.
“The result is extremely satisfactory and is due in part to vigorous growth in markets such as the USA, U.K., Russia and Eastern Europe—all identified as growth markets for the company,” said LEGO CEO Jørgen Vig Knudstorp, in a statement.
LEGO has been capturing market share across all of its markets. Although Europeans already own the most LEGO, there has still been double-digit growth in that market, according to the company. Classic sets such as LEGO City, LEGO Duplo, and LEGO Star Wars were especially popular with consumers in 2010 but virtually all product lines sold more than expected.
However, the new online game LEGO Universe, which was introduced toward the end of 2010, did not live up to its initial sales expectations and had only a limited effect on revenue, says LEGO.
LEGO Games, introduced in selected markets in 2009, launched globally in 2010 and achieved significant sales growth.
LEGO says its improved in-stock situation meant that it was able to keep retailers’ shelves stocked with LEGO products throughout the holiday season. LEGO expects to be able to maintain and improve upon the high level of supply reliability for its customers.
The company says it will be able to do this in part to its increased workforce. There are an average of 8,365 full time employees. This 1,079 more full time employees than the company had in 2009.
Chiquita Brands Signs Nancy Bailey & Associates
Nancy Bailey & Associates announced that it has been selected by Chiquita Brands to extend both the Chiquita and Fresh Express brands into both non-food and new food categories in the U.S. and Canada.
Chiquita is the No. 1 consumer preferred banana brand globally and has 99 percent brand awareness among American consumers. Americans also consume 20 million servings of Fresh Express salads each week, making it the No. 1 salad brand in the United States.
“The positive associations that consumers make between both Chiquita and Fresh Express with quality, flavor, freshness, and nutrition creates tremendous potential for brand extension,” said Nancy Bailey, chairman, Nancy Bailey & Associates, in a statement. “We are confident that licensing will enable Chiquita and Fresh Express to leverage these qualities in relevant categories and retail channels.”
Under the agreement, Nancy Bailey & Associates will help Chiquita extend its flavor profile and value-added ingredients, as well as its iconic logo, the Miss Chiquita brand character, and its vintage artwork into multiple product categories. Fresh Express will also extend its brand in both food and non-food categories.
Nancy Bailey & Associates will target food, drug, and mass retailers, to distribute a wide range of Chiquita and Fresh Express branded products for launch in 2012.
Mattel Shuts Shanghai Barbie Store
Two years after its opening, Mattel has shut down its six-floor Barbie store in Shanghai, China. Media speculation from analysts cited lack of awareness for the Barbie brand in China. Shanghai is thought to be a testing ground for companies to launch brands into the Chinese market. Mattel did say in media reports that it will continue to expand Barbie in China.
Nickelodeon Shows to Air in Russia
Viacom International Media Networks (VIMN) signed a deal with Russian TV network TNT for 250 hours of Nickelodeon’s animated and live-action programming, along with securing a number of new consumer product deals.
TNT acquired the animated series SpongeBob SquarePants, The Adventures of Jimmy Neutron, As Told by Ginger, Hey Arnold, and My Life as a Teenage Robot. TNT will also broadcast the live-action series iCarly, Big Time Rush, and The Troop. The programming with be included as part of an existing Nickelodeon-branded block on TNT and will be localized for Russian audiences.
In addition, VIMN also signed a host of consumer product deals for SpongeBob SquarePants, including agreements for plush, personal-care products and apparel, as well as outdoor and sporting items, and stationery. All products are expected to be on Russian shelves this summer.