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Toysrus.com Rebounds After 1999 Stumble

By Jon Weisman
Jan 5, 2001 12:00 AM PT

Toysrus.com announced Thursday that its online sales for the nine weeks leading up to Christmas totaled US$124 million, a 218 percent increase over the previous year's holiday season.

Toysrus.com Rebounds After 1999 Stumble

The good vibes coming from Toysrus.com differ considerably from those of 12 months ago, when it was one of several e-tailers that drew heavy fines from the U.S. Federal Trade Commission (FTC) for failing to meet promised shipping deadlines.

"Last year, we were in deep apology mode," Toysrus.com vice president of corporate communications Jeanne Meyer told the E-Commerce Times. "This year, we're tinkering with [online partner] Amazon to figure out how to do it better next year."

The holiday sales figures for Toysrus.com represent more than 75 percent of the company's $164 million total sales for its fiscal year to date, a period from February 1st through December 25th.

Meyer added that in its report, Toysrus.com did not include shipping and gift wrap revenue, which would boost the total by as much as 10 to 15 percent.

Difference a Year Makes

Toysrus.com shared credit for its success with e-tail giant Amazon. In August, Toysrus.com and Amazon announced that they were partnering on a 10-year deal to run a co-branded toy site, which launched September 14th.

"Amazon is bringing us gamers we never had before," Meyer said.

On Tuesday, Nielsen//NetRatings reported that the Amazon/Toysrus.com site saw 123 million visitors, more than five times the traffic of its closest competitor, eToys.com.

Corrective Surgery

Earlier in 2000, Toysrus.com made a number of corporate moves to correct its fulfillment problems -- opening two new distribution centers, hiring four executives to oversee growth in infrastructure and fulfillment, and revamping its customer service software to help it through the holiday shopping season.

"It was important for us to regain trust," Meyer said. "I think we went a long way to winning back customers and to winning over new ones."

For its part, Amazon said last month that it shipped more than 99 percent of items ordered on its site in time to arrive for the holidays.

Still, the holidays were not perfect for Toysrus.com. State investigators in New Jersey reportedly subpoenaed records from the company in December as part of an ongoing investigation into the online toy store's privacy practices.

Looking Ahead

Otherwise, however, instead of having to start a new year with a cleanup of a messy holiday season, Toysrus.com and parent company Toys 'R' Us (NYSE: TOY) are looking ahead.

"In the coming year, we intend to capitalize on our initial success by making further improvements to the site in order to generate continued strong sales growth from our online business," Toys 'R' Us president and chief executive officer John Eyler said.

Meyer added that Toysrus.com plans to transition its Babies 'R' Us site to the Amazon platform in the spring.

Meanwhile, eToys (Nasdaq: ETYS) is faltering. The Los Angeles-based e-tailer, though No. 2 in the U.S. toy market, has in recent weeks announced the shutdown of its European Web site, said that it will miss its revenue estimates for its third quarter and announced plans to cut its workforce in a bid to conserve a dwindling cash supply.

eToys stock closed Thursday at 16 cents per share.

Retail Fun and Games

Toys 'R' Us said that its overall retail sales, including those from Toysrus.com, improved 4 percent for the holiday season and 3 percent for the fiscal year to date.

Merrill Lynch analyst Peter Caruso said that his firm was raising its rating on Toys 'R' Us from neutral to accumulate, saying that "for the first time in many years, [Toys 'R' Us] appears to be gaining share back from Wal-Mart."

Caruso added that operations at Toys 'R' Us "have experienced difficulties in the past [but] new company management is beginning to repair operations."

Toys 'R' Us stock closed up 22.3 percent Thursday, at $22.63.


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