Big-box, online pressure, Toys R Us posts 4Q loss

WAYNE, N.J. (AP) -- Toys R Us wants to simplify.

The largest specialty toy seller announced plans to streamline its operations and stabilize its results as it reported a fourth-quarter loss, hurt by tough competition during the crucial holiday season and its own missteps with pricing and inventory.

Privately held company endured a harsh holiday season, with no blockbuster toys, weak sales and ruthless competition from discount stores and online retailers like Amazon.com. Revenue from U.S. stores open at least a year, a key retail metric, tumbled 4.1 percent domestically.

Antonio Urcelay, who was named CEO in October, just ahead of the holiday season after leading the company on an interim basis, called the results disappointing.

"It was a challenging year, with declines both in our domestic and international segments," Urcelay said.

In a meeting with media Wednesday, Urcelay outlined plans to cut costs and stabilize the business. The company has already announced 100 job cuts at its headquarters in Wayne, N.J., a portion of the 500 job cuts made worldwide. It is closing a distribution center in Nevada in June as it transforms its stores into smaller distribution hubs. There will be about 50 job cuts there.

The company is planning to cut costs elsewhere but declined to give a specific figure.

Toys R Us plans to slow store growth in the U.S. and close some stores as leases expire, but Urcelay said that it would not be a "material" number.

In stores, the company plans to declutter, getting rid of signs and widening aisles. It's also considering store-within-a store areas to feature some brands.

It also plans to simplify the way it offers discounts, with more direct offers and fewer exclusions for those offers.

Urcelay said the changes are being made after Toys R Us studied what customers were saying about stores. They also plan to revamp their mobile technology and website to make shopping easier online. Another customer complaint, slow checkout, will mean fewer questions from clerks at the counter.

It also plans to focus more on its loyalty club programs for Toys R Us and Babies R Us and offer more deals to its members, which make up 70 percent of all of its sales.

"We are encouraged that all of these foundational issues are firmly within our control to fix," said Urcelay.

CEO Antonio Urcelay said improvements in inventory flow and other actions are already paying off. So far in 2014, sales at stores open at least a year have risen 3.5 percent in the U.S., and 0.2 percent overseas, he said.

Toys R Us is also expanding in China, "where business has continued to be strong," said Urcelay.

But the environment is likely to remain challenging for the foreseeable future. For the quarter ending Feb. 1, Toys R Us reported a loss of $207 million. That compares with net income of $240 million in the same quarter a year ago. Revenue fell 9 percent to $5.27 billion from $5.77 billion.

Revenue for all of 2013 fell 7.4 percent, to $12.5 billion. The previous year, 2012, did have an extra week.

And the company posted a loss of $1 billion for the year, including one-time charges of $727 million. A big chunk of those non-cash charges were for allowances on deferred tax assets that the company does not expect to be "realized in the foreseeable future."

Besides its namesake stores, the Wayne, N.J. company also owns the Babies R Us stores and the FAO Schwarz brand. It has 872 stores in North America and more than 700 internationally. It also sells its goods online at Toysrus.com, Babiesrus.com, eToys.com and FAO.com.

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AP Writer Joe Pisani in New York contributed to this story.