Toys R Us is closing all of its standalone Imaginarium toy shops and Kids R Us clothing stores after failing to improve profitability at the chains.
The two divisions will remain as distinct areas in Toys R Us outlets, but the 182 free-standing stores will close by the end of January, along with three distribution centres. The decision followed fierce competition from big discounters, including Wal-Mart.
Chief executive John Eyler said recent sales and profits at the two chains had plummeted. 'We have worked hard over the past few years to expand our apparel business and the Imaginarium area within our Toys R Us and Babies R Us stores, and these efforts have been successful.
'However, our efforts to reverse significant performance declines within the free-standing Kids R Us and Imaginarium stores have not met with success,' he said.
Comparable sales for the third quarter fell by 11.4 per cent at Kids R Us. Sales over a nine-month period fell from US$351 million (£207.8 million) last year, to US$293 million (£173.5 million).
Eyler said the closures would cost US$280 million (£165.8 million), but yield US$8 million (£4.7 million) in operating earnings this year and US$20 million (£11.8 million) the year after. He said the performance of the 681 US Toys R Us stores was also disappointing.
Comparable sales fell by 3 per cent in the third quarter. Total sales, including currency translation gains, climbed 2.2 per cent to US$2.32 billion (£1.37 billion). Without the currency effect, sales would have been flat. The international division increased comparable sales by 1.7 per cent.
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