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Wednesday, November 19, 2003
Luxury Goods
are going to be the first against the wall when the revolution comes.....

...and toys are included:

From the Seattle Times via Google News. PRINCETON, N.J. — Toys R Us said yesterday it will close its money-losing Kids R Us and Imaginarium chains, eliminating about 3,800 jobs. None of the closures are scheduled for Washington state.

The company's shares plunged 12 percent after it reported its third-quarter loss unexpectedly widened and it cut its annual profit forecast.

The chains will be shut by the end of January and include 146 Kids R Us clothing stores and 36 Imaginariums, which sell educational toys. Three distribution centers also will be closed. Toys R Us will incur about $280 million in pretax costs, the company said.

Chief Executive John Eyler said he decided to close the businesses after results worsened faster than the company expected. Kids R Us has lost money the past three years as same-store sales fell. Eyler, who finished remodeling more than 600 U.S. Toys R Us stores last year, has failed to attract shoppers amid competition from discounter Wal-Mart, analysts said.

"They can cut some costs and expenses," said Touk Praseuthsy, of Ariel Capital Management, which is Toys R Us' fifth-largest shareholder with 7.4 million shares as of September. "The driver is going to have to be top-line growth. They need to bring more people into the stores."

The retailer's third-quarter net loss of $38 million, or 18 cents a share, was twice as wide as analysts surveyed by Thomson Financial had expected.

Toys R Us, which has 1,629 stores and had 65,000 employees as of February, fell $1.56 to $11.18 yesterday.

The company will try to relocate some Kids R Us and Imaginarium employees to other divisions, spokeswoman Susan McLaughlin said.

The Imaginarium sections inside Toys R Us chains will remain open. Imaginarium is about a $30 million business, Eyler said in an interview. The company will continue to sell clothing at its Toys R Us and Babies R Us stores.

The job cuts come on top of about 900 announced earlier this year after Toys R Us posted disappointing holiday sales.

Sales at U.S. toy stores open at least a year dropped 3 percent after an 18 percent decline in the video-game business. Sales outside the United States rose 1.7 percent.

Eyler said he wasn't interested in buying the assets of FAO, owner of the FAO Schwarz, Zany Brainy and Right Start toy chains. Eyler came to Toys R Us in January 2000 from FAO Schwarz, where he was chief executive, before the company was bought by Right Start and renamed FAO.

FAO has said that unless sales pick up it may not be able to operate normally this month and next. The toy seller, which emerged from bankruptcy in April, told an investment banker to seek a potential buyer and has asked suppliers to reduce shipments and accept later payments.
Posted at 9:31 AM by John.
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