Toys R Us lost $34 million in the 13 weeks to July 30th compared to a loss of $14 million in the same period last year.
However, revenues grew three per cent to $2.6 billion, with growth aided by "foreign currency translation" and sales from new stores.
Jerry Storch, CEO and chairman, Toys R Us said: "I'm proud of the team for achieving these results and for their strong commitment to growing margin rate and managing expenses in this tough business climate."
Confident ahead of Q4, Storch added: "In the context of this uncertain economic environment, we believe our team has taken the right steps to position the company well for the remainder of the year, which includes our peak selling season.
"We are excited by the differentiated merchandise assortment we will offer shoppers in the months ahead and the plans we have in place to provide value, knowledgeable service and added convenience to consumers."
Toys R US saw growth in its core toy and learning toy categories, with 15 per cent and 11 per cent increases, respectively.
The entertainment category, which includes video games, continued its poor performance, shrinking 13 per cent.
By the end of 2011 Toys R Us expects to have invested around $400 million on capital expenditures. The company recently committed to a streamlining of its online operations, revamping websites and adding new, state-of-the-art packing and distribution centres.
Toys R Us said that internet sales "continued to be strong."