TOYS“R”US, INC. ANNOUNCES FINANCIAL PERFORMANCE FOR THE 2007 FOURTH QUARTER AND FISCAL YEAR

Net Earnings Increase 39.3% for the Fourth Quarter and 40.4% for the Year Strong Performance Reflects Continued Progress Across all Business Segments

WAYNE, NJ (May 2, 2008) -- Toys“R”Us, Inc. today reported results for its fourth quarter and fiscal year ended February 2, 2008. The company’s fourth quarter reporting period for fiscal 2007 includes thirteen weeks of operating results compared to fourteen weeks in fiscal 2006, which ended February 3, 2007. The company’s annual reporting period for fiscal 2007 includes fifty-two weeks of operating results compared to fifty-three weeks in fiscal 2006.

For the fourth quarter ended February 2, 2008, the company reported a 39.3% increase in net earnings to $312 million, up from $224 million for the fourth quarter ended February 3, 2007. Operating earnings for the fourth quarter of fiscal 2007 increased 17.5% to $671 million from $571 million in the fourth quarter last year, while net sales reached $5.827 billion for the 2007 fourth quarter, up 2.6% from $5.679 billion in the fourth quarter of fiscal 2006.

For the year ended February 2, 2008, the company reported a 40.4% increase in net earnings to $153 million, up from $109 million for the year ended February 3, 2007. Operating earnings in fiscal 2007 rose 7.2% to $696 million from $649 million a year ago, while net sales increased 5.7% to $13.794 billion from $13.050 billion in fiscal 2006.

Total debt at the end of fiscal 2007 declined by $65 million from the prior year, while total cash and short-term investments increased by $154 million. Total long-term debt outstanding at the end of the 2007 fiscal year (including current portion) was $5.874 billion, an increase of $86 million from the prior fiscal year. The increase primarily relates to refinancing $137 million of short-term borrowings as long-term debt subsequent to year-end.

“We are very pleased with the continued progress we made in 2007 to improve company performance across all segments of our business,” said Jerry Storch, Chairman and CEO, Toys“R”Us, Inc. “Better gross margins, improved comparable store sales and the positive impact of new store openings all contributed to higher net earnings for both the fourth quarter and the year. These results are especially gratifying given the difficult economic climate and the unique challenges experienced by the toy industry during the past year.”

“As we look ahead, we will continue to leverage our toy and baby products authority positions, deliver a differentiated shopping experience and provide great value for our customers. While we know we still have much work to do, we are proud of the significant advancements we’ve made toward positioning Toys“R”Us, Inc. for growth over the long-term,” Mr. Storch concluded.

Financial Results by Segment
Toys“R”Us - U.S.
For the thirteen weeks ended February 2, 2008, comparable store net sales rose 3.2%. Net sales for the period decreased 0.5% to $2.897 billion from $2.912 billion in the fourteen weeks ended February 3, 2007 primarily a result of the absence of a fourteenth week in the fourth quarter of fiscal 2007. This was partially offset by increased comparable store net sales. For the fifty-two weeks ended February 2, 2008, comparable store net sales rose 2.2%. Net sales for the segment increased 1.0% to $5.955 billion compared to $5.894 billion for the fifty-three weeks ended February 3, 2007, primarily reflecting the increase in comparable store net sales and Internet-based revenues partially offset by the impact of the closing of 85 stores in fiscal 2006 and the absence of a fifty-third week in fiscal 2007.

For the fourth quarter of fiscal 2007, operating earnings were $360 million as compared with $318 million in fiscal 2006. The increase in operating earnings was primarily due to an increase in gross margin as a percentage of net sales, reaching 31.9% in the fourth quarter of fiscal 2007 compared to 30.0% in the fourth quarter of fiscal 2006 as a result of increased sales of private label products and improved comparable store net sales. The increase was partially offset by the absence of a fourteenth week in the fourth quarter of fiscal 2007 and increases in selling, general and administrative expenses due in part to planned increases in promotional activities.

For fiscal 2007, operating earnings were $269 million versus $254 million for fiscal 2006. The segment’s improved results were primarily a result of an increase in gross margin as a percentage of net sales, reaching 32.1% in fiscal 2007 compared to 31.0% in fiscal 2006 due to higher margins driven by private label product sales, positive comparable store net sales growth and a decrease in depreciation and amortization expense as a result of store closures in fiscal 2006. These increases were offset by increases in selling, general and administrative expenses primarily resulting from increased costs to improve store layouts and planned increases in promotional activities and the absence of a fifty-third week in fiscal 2007.

Toys“R”Us - International
For the thirteen weeks ended February 2, 2008, comparable store net sales rose 1.2%, while net sales rose 8.4%, to $2.331 billion from $2.150 billion for the fourteen weeks ended February 3, 2007. Net sales increased primarily due to changes in foreign currency translation of $193 million, new store openings and the increase in comparable store net sales. These increases were partially offset by the absence of a fourteenth week in the fourth quarter of fiscal 2007. For the fifty-two weeks ended February 2, 2008, comparable store net sales rose 2.7%, while net sales for the segment increased 11.8%, to $5.344 billion from $4.780 billion for the fifty-three weeks ended February 3, 2007. Net sales increased primarily due to changes in foreign currency translation of $329 million, new store openings and the increase in comparable store net sales, which was partially offset by the absence of a fifty-third week in fiscal 2007.

For the fourth quarter of fiscal 2007, operating earnings rose to $305 million compared with $251 million in fiscal 2006. This was due primarily to an increase in gross margin as a percentage of net sales, which reached 35.1% in the fourth quarter of fiscal 2007 from 33.5% in the fourth quarter of fiscal 2006 due to a change in sales mix toward higher margin products, the favorable impact of foreign currency translation, and increased sales from new store openings, which was partially offset by the absence of a fourteenth week in the fourth quarter of fiscal 2007.

For fiscal 2007, operating earnings were $336 million versus $233 million for the 2006 fiscal year. The segment’s improved results were primarily a result of increased sales from new store openings, an increase in gross margin as a percentage of net sales reaching 35.6% in fiscal 2007 compared to 34.4% in fiscal 2006 due to favorable changes in sales mix toward higher margin products, positive comparable store sales growth, and the favorable impact of foreign currency translation. These increases were offset by an increase in selling, general and administrative expenses primarily resulting from new store openings and the absence of a fifty-third week in fiscal 2007.

Babies“R”Us
For the thirteen weeks ended February 2, 2008, comparable store net sales rose 1.8%. Net sales for the segment decreased by 2.9% to $599 million from $617 million in the fourteen weeks ended February 3, 2007, primarily as a result of the absence of a fourteenth week in the fourth quarter of fiscal 2007, which was partially offset by new store openings and the increased comparable store net sales. For the fifty-two weeks ended February 2, 2008, comparable store net sales increased 2.0%, while net sales for the segment increased 5.0% to $2.495 billion from $2.376 billion for the fifty-three weeks ended February 3, 2007. The increase was primarily a result of new store openings, as well as the increase in comparable store net sales, and was partially offset by the absence of a fifty-third week in fiscal 2007.

For the fourth quarter of fiscal 2007, operating earnings were $83 million as compared with $97 million in fiscal 2006. The decrease was primarily due to the absence of a fourteenth week in the fourth quarter of fiscal 2007 and lower gross margin as a percentage of net sales from additional markdowns to keep inventory current.

For fiscal 2007, operating earnings were $357 million versus $340 million in fiscal 2006. The segment’s improved results reflect increased sales from new store openings, positive comparable store net sales growth, and an increase in gross margin as a percentage of net sales reaching 39.7% in fiscal 2007 compared to 39.4% in fiscal 2006 primarily due to favorable changes in sales mix toward higher margin products. These increases were partially offset by additional markdowns to keep inventory current, increases in selling, general and administrative expenses primarily resulting from new store openings and planned increases in promotional activities, and the absence of a fifty-third week in fiscal 2007.

About Toys“R”Us, Inc.
Toys“R”Us, Inc. is the world’s leading dedicated toy and baby products retailer. Currently it sells merchandise through more than 1,500 stores, including 585 Toys“R”Us stores and 260 Babies“R”Us stores in the U.S., more than 680 international stores in 33 countries, which includes licensed and franchise stores, and through its Internet site at Toysrus.com.

Further information about the company's fiscal 2007 financial performance is presented in its Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission today.

This press release contains “forward looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. All statements herein that are not historical facts, including statements about our beliefs or expectations, are forward-looking statements. We generally identify these statements by words or phrases, such as “anticipate,” “estimate,” “plan,” “expect,” “believe,” “intend,” “foresee,” “will,” “may,” and similar words or phrases. These statements discuss, among other things, our strategy, store openings and renovations, future financial or operational performance, anticipated cost savings, results of store closings and restructurings, anticipated domestic or international development, future financings, and other goals and targets. These statements are subject to risks, uncertainties, and other factors, including, among others, competition in the retail industry, seasonality of our business, changes in consumer preferences and consumer spending patterns, product safety issues including product recalls, general economic conditions in the United States and other countries in which we conduct our business, our ability to implement our strategy, our substantial level of indebtedness and related debt-service obligations, restrictions imposed by covenants in our debt agreements, availability of adequate financing, our dependence on key vendors for our merchandise, domestic and international events affecting the delivery of toys and other products to our stores, economic, political and other developments associated with our international operations, existence of adverse litigation and other risks, uncertainties and factors set forth in our reports and documents filed with the Securities Exchange Commission (which reports and documents should be read in conjunction with this press release). We believe that all forward-looking statements are based on reasonable assumptions when made; however, we caution that it is impossible to predict actual results or outcomes or the effects of risks, uncertainties or other factors on anticipated results or outcomes and that, accordingly, one should not place undue reliance on these statements. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to update these statements in light of subsequent events or developments. Actual results may differ materially from anticipated results or outcomes discussed in any forward-looking statement.

Consolidated Statements of Operations

 

For more information please contact:

Toys"R"Us, Inc.
Kathleen Waugh
Phone: 646-366-8823
973-617-5888
Email: waughk@toysrus.com