Retailer reports rise in profits for the second quarter helped by lower costs.
Net earnings increased to $27 million for the second quarter of 2009 ended August 1st, 2009, compared to $13 million for the second quarter of fiscal 2008.
Net sales during the quarter were $2.567 billion, compared to $2.771 billion for the second quarter of fiscal 2008. Foreign currency translation contributed to $59 million of this decrease.
The firm said that the majority of the decline in sales was in the entertainment products category, specifically video game hardware and software, driven by the industry-wide weakness of those businesses.
Jerry Storch, chairman and CEO, said: “We are pleased with our performance for the first half of this year and believe our results clearly demonstrate that we can successfully operate and achieve results in any economic environment. Our second quarter results delivered on our expectations, and the team did a great job growing margin rate while managing expenses.”
Higher-margin products sold much better than lower-margin video games. This is reflected in the improved gross margin rate of 37 per cent, which represents an increase from 36.6 per cent in the second quarter of fiscal 2008.
Operating expense for the quarter decreased by 6.4 per cent, or $57 million, benefitting from $22 million related to foreign currency translation.
Storch continued: “We remain aggressive in positioning the company for long-term growth and increasing our market share as the leading specialty toy and baby products retailer. In the second quarter, we announced the acquisition of the legendary FAO Schwarz.
“This followed our first quarter strategic acquisitions of eToys.com, babyuniverse.com, ePregnancy.com and Toys.com. And, just this week, we added KB Toys to our growing portfolio of family-friendly brands.“
Storch concluded: “We continue to make prudent capital investments to expand our business, domestically and around the world. During the second quarter, we added two “R” Superstores and completed nine side-by-side store conversions in the U.S. We also opened four new Toys R Us stores internationally.”