Online Costs Hit Toys R Us Earnings

FRAMINGHAM (03/09/2000) - A $64 million charge to set up and operate ToysRUs.com in the fourth quarter helped lower earnings below analyst projections for the giant toy retailer.

In an earnings statement released yesterday, Toys R Us Inc. in Paramus, N.J., said the company spent $64 million to establish and operate its Internet subsidiary in the fourth quarter ended Jan. 29. For the 1999 fiscal year, the company spent $86 million developing the site.

Earnings for the quarter were $235 million, or 98 cents per diluted share.

Excluding the online charges, Toys R Us' earnings would have been $276 million, or $1.15 per share. Analysts were predicting earnings of $1.09 per share. Toys R Us reported earnings of $310 million, or $1.23 per share, for the same period last year.

The retailer reported $5.03 billion in fourth quarter revenue, up nearly 2 percent from $4.94 billion for the same period last year. For the full year, Toys R Us' revenue was $11.9 billion, a 6 percent gain from $11.2 billion from the previous year.

The company said its Internet business generated $49 million in sales last year. Its Web site was overrun with traffic during the holiday period, making access difficult, and some customer orders weren't delivered until after Christmas.

Overall, 1999 was "a difficult year for the company, but one in which the foundation for the future was strengthened," said John Eyler, CEO. He joined the company in January from FAO Schwarz.

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