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Monday, 14 August, 2000, 16:01 GMT 17:01 UK
Internet hits Toys-R-Us
Toys-R-Us web site
Toys-R-Us profits were hit by its web operation
Retailer Toys-R-Us has posted a 75% slump in profits, as the company was hit by its ailing internet operations.

The toy seller said its net profit in the second quarter of this year fell to $3m, sharply down from $12m in the same period last year.

However, the company said its net profit during the quarter totalled $16m when losses from its internet subsidiary were not counted.

Toys-R-Us and its toysrus.com website had problems with delivery, especially in the run-up to Christmas 1999. Thousands of US customers did not receive their orders in time, and the Federal Trade Commission fined the company $350,000.

The company had pumped millions of dollars into setting up its own online operation and distribution network for order fulfilment, but failed to tackle web competitors like eToys.

Toys-R-Us is now hoping that its recently-announced internet joint venture with retail giant Amazon.com will turn its internet business around.

Online moneyspinner?

Last week, the two struck an alliance to sell toys and baby products on the internet.

"By combining our brand name and merchandising expertise with Amazon's proven internet expertise and distribution capability, we will be the global leader for toys, children's and babies' products on the internet," said Toys-R-Us chief executive John Eyler.

He said he hoped the move would help its internet business to start making profits by 2002.

But Mr Eyler did warn that the company would incur costs related to the transfer of Toyrus.com's operations to the new web site.

The company's core toy retail business did well globally, with international store sales rising 3%, largely due to double-digit gains in France and single-digit gains in the UK. But in the US, store sales were down 2%.

"We are very pleased by our results in the second quarter," Mr Eyler said.

"Despite the lack of hot toys that drove sales in the year-ago period, we reported strong revenues, thereby indicating the strength of our underlying core business."

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See also:

11 Aug 00 | Business
Amazon, Toys R Us play together
27 Apr 00 | Business
eToys confident despite losses
17 Aug 99 | The Company File
Online toyshop alliance collapses
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