International toymaker, “Toys R Us” has reported that its marketing team has helped to narrow down net loss for the first quarter, though its sales fell drastically by 6 percent during the first quarter due to weak sales cues in the entertainment sector. Though its first quarter losses were at $140 million, it has improved from last year when first quarter deficit was at $196 million. It could be a direct result of reduction in sales and promotional activities from $917 million to $827 million. Total sales during 2014 fell from $2.48 billion to 2.23 billion within one year, even as sales in comparable business too fell by 2.3 percent due to seasonal decline in entertainment and baby products.
Reasons for loss in sales
Though a large percent of decline in sales has largely been due to slowdown in promotional activity, the firm’s spokesperson stated that recent upheaval in foreign currency has also had a negative impact on sales and net sales have in realty fallen by 23 million. This year, the operational losses too were lesser at $30 million, when compared to last year when it was at $91 million.
The firm has been going through a very rough phase since 2005 when it agreed for buyout plan from a consortium of equity investors at a payment of $6.6 billion. Though it is still undergoing financial crisis, the company is planning an IPO with the help of its new CEO and has already registered details with the SEC for approval as the buyout plan turned sour. Sales in the holiday quarter during end of last year too fell by 2.7 percent, though overall margins were stable due to smart pricing strategies.
Measures to improve the situation
The company appointed David Brandon last week who has a strong reputation in the market for launching IPO’s successfully in the market for established brands. Though most companies with strong brand names that are privately owned have been had a successfully stint in the markets, it remains to be seen if debt ridden “Toys R Us” will be able to repeat this feat. According to rating agency Moody’s, though market is challenging right now for Toys “R” Us with competitors like Target (NYSE: TGT), WalMart (NYSE: WMT) and Best Buy (NYSE: BBY), its strong relationship with vendors like Mattel (NASDAQ: MAT), Disney (NYSE: DIS) and Hasbro (NASDAQ: HAS) can help it to manage sales. The biggest challenge for the stores’ sales comes from super market chains like Target and Kroger (NYSE: KR) that offer one-stop solutions for customers.