Toys “R” Us-Japan Ltd. said Wednesday its net profit for the year through Jan. 31 dropped 1.2 percent to 4.09 billion yen on weak same-store sales.
The nation’s largest toy retailer, which is 47 percent owned by its U.S. parent, said operating profit was down 1.8 percent to 8.4 billion yen on revenue of 179.72 billion yen.
Though revenue was 2.5 percent higher than in the previous year, the results fell short of the firm’s earnings forecast announced in September.
Company officials blamed the absence of high-margin game consoles like Game Boy Advance, which boosted profits in the previous year, and downward price pressure on toys in general.
Sales during the all-important Christmas and New Year’s period at stores that have been open at least one year declined 7.6 percent from the previous season, with same-store sales for the whole year dipping 4.3 percent.
The chain, which had 134 outlets as of Jan. 31, said it plans to open 14 new outlets, including three Babies “R” Us stores. The chain opened its first store specializing in infant goods in Chiba Prefecture in December.
For the current business year, the company expects to make 4.2 billion yen in net profit on revenue of 190 billion yen.
The firm’s shares, traded on the Jasdaq over-the-counter market, finished the Wednesday session 10 yen lower at 1,200 yen. The shares have dropped more than 80 percent in value since they peaked in May 2000.
Mariko Watanabe, senior analyst at HSBC Securities (Japan) Ltd., said the sharp price drop reflects distorted investor perception of the firm’s growth potential.
“The company reached its maturity a lot quicker than they thought,” she said, pointing out that competition among its own stores is eating into same-store sales.
The problem is natural in the evolution of any big chain and does not mean the firm’s store-opening policy is too aggressive, she said. Still, the firm should develop stores that target shoppers who cannot get to large outlets in the suburbs, she added.
She said Babies “R” Us has potential as a new growth engine. “There are few big players in the field, so it could become a cash cow.”
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