Shares of

Toys R Us

(TOY)

were dropping after the company said a charge caused its third-quarter loss to widen from a year ago. The retailer also lowered full-year earnings projections and reported that it will close 182 poorly performing stores.

In the three months to Nov. 1, the company lost $38 million, or 18 cents a share, compared with a loss of $28 million, or 13 cents a share, a year ago. Excluding certain items, the company would have lost $27 million, or 13 cents a share. Analysts were calling for a loss of 9 cents a share.

Recently, shares of the company were down 66 cents, or 5.2%, at $12.08.

The company had an operating loss of $30 million, compared with a loss of $16 million last year. Sales were $2.32 billion, an increase of 2.2%. Excluding currency impacts, however, revenue was flat. Comparable-store sales fell 3% in the U.S. toy store division. Internationally, same-store sales increased 1.7%.

"We were disappointed in the sales and earnings performance of our U.S. toy stores and freestanding Kids R Us stores during the third quarter," said CEO John Eyler. "However, our performance was solid in our Babies 'R' Us, International and Toysrus.com divisions."

Toys R Us also said it ended the third quarter with no short-term borrowings and more than $900 million in cash. It is planning for capex between $300 and $330 million in 2003.

The company now sees earnings of $1.05 to $1.15 a share in 2003, excluding items and before restructuring and other charges related to the planned store closings. Previously, the company had expected to earn $1.15 a share, excluding items.

Analysts are calling for earnings of $1.05 a share in the year. The company earned $1.09 a share in the prior year.

Additionally, the company said it plans to close 146 freestanding Kids R Us and 36 Imaginarium stores due to poor financial performance. Most facilities are expected to close on or before Jan. 31, 2004, and Toys R Us expects to have restructuring charges of $280 million pre-tax.

"Our efforts to reverse significant performance declines within the freestanding Kids 'R' Us and Imaginarium stores have not met with success," said Eyler. "The accelerating deterioration in the financial performance of these freestanding stores has led us to conclude that it is in the best interests of our company and of our shareholders to cease operations in these freestanding stores."

Due to the closings, the company expects "significant" cash flow in 2003 and an increase in free cash flow in 2004. Also, the company sees operating earnings improving about $8 million in 2004 and about $20 million a year thereafter.

The company noted that it is considering reopening roughly 15 of the closing Kids R Us stores as Babies R Us stores.