Toys R Us Swings to Profit

Toys R Us

(TOY)

swung to a second-quarter profit after revealing recently that it was considering exiting its namesake business.

The toy chain posted a profit of $61 million, or 28 cents a share, for the quarter, compared to a loss of $11 million, or 5 cents a share, in the same period last year. Sales fell 3.9% from a year ago to $2 billion.

Excluding the impact of currency translation that increased 2004 second-quarter sales by $30 million, and a $68 million decline in sales associated with store closings, the company's total sales decreased 2.2%.

Two weeks ago, Toys R Us announced that it may sell its toy business and focus on its fast-growing Babies R Us unit. The company has been battered by stiff competition in recent years from discounters like

Wal-Mart

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. If it does exit its core business, Toys R Us would join a growing list of companies that have folded from the toy business amid the discount retail revolution, including

KB Toys

,

FAO

and the protracted auction of

Walt Disney's

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Disney Stores.

In its second quarter, the global toy business of Toys R Us posted a 7.7% drop in same-store sales, while its Babies R Us business posted a 1.8% increase in that measure.

"Maintaining an exceptionally strong balance sheet, ample liquidity and significant financial flexibility continue to be among Toys R Us' highest priorities," John Eyler, the company's chairman and chief executive, said in a statement.