LONDON (Brand Republic) – US toy giant Toys R Us is hoping its week-old alliance with internet retailer Amazon.com will boost its flagging internet business, after it reported a 75% slump in profits in the second quarter.
Net profit for the second quarter fell to $3m from $12m for the same period last year and was blamed exclusively on the company’s struggling internet operation.
The company has pumped millions into setting up its own online operation and distribution network, but failed to tackle web competitors such as eToys.com. It ran into problems with deliveries and was fined $350,000 by the US Federal Trade Commission when customers did not receive goods ordered in time for Christmas.
But Toys R Us is bullish about the potential for internet sales and its tie-up with Amazon. It will be responsible for buying and marketing toys and baby goods, leaving the crucial fulfilment and delivery to Amazon and its proven distribution network.
John Eyler, Toys R Us chief executive, said the deal would make the company’s e-commerce activities profitable by 2002, but said it would continue to incur costs as the Toysrus.com operations was transferred.
The core toy retail business did well globally, with international store sales rising 3% due to healthy gains in France and the UK, but store sales were down 2% in the US.