Toys “R” Us Inc. reported financial results for the third quarter of fiscal 2017, which ended October 28, 2017.
On September 18, Toys “R” Us and certain of its U.S. subsidiaries and its Canadian subsidiary voluntarily filed for relief under Chapter 11 of the Bankruptcy Code. In addition, the Canadian subsidiaries voluntarily commenced parallel proceedings under the CCAA in Canada. In accordance with accounting principles generally accepted in the United States (“GAAP”), as joint control by the U.S. and Canadian courts does not constitute continued common control by the company, the operating results of the Canadian subsidiaries are no longer consolidated with Toys “R” Us Inc. subsequent to September 18. Due to the deconsolidation of these subsidiaries, the operating results during fiscal 2017 are not comparable with fiscal 2016.
Net sales were $2,018 million, a decrease of $89 million compared to the prior year period. Excluding a $6 million negative impact from foreign currency translation, net sales declined by $83 million largely attributable to a decline in same store sales most notably in the baby category. Partially offsetting the decrease was an increase in consolidated e-commerce sales.
Consolidated same store sales decreased by 4.4 percent, driven by a 7 percent decline domestically.
Gross margin dollars were $644 million, a decline of $113 million compared to the prior year period. Gross margin rate was 31.9 percent, a decrease of 400 basis points. Domestic gross margin rate declined by 580 basis points, due to a reduction in vendor allowances as a result of the Chapter 11 filing as well as an increase in promotions and our competitive pricing strategy.
SG&A was $798 million, an increase of $13 million compared to the prior year period. The increase in SG&A was primarily due to an increase in advertising expenses and restructuring advisory fees, partially offset by expense reduction initiatives.
Operating loss was $208 million, compared to $40 million in the prior year period. Domestic segment operating loss increased by $95 million due to a reduction in gross margin dollars. Corporate overhead increased by $53 million primarily due to the gain in third quarter 2016 on the sale of the FAO Schwarz brand.
Adjusted EBITDA for the quarter was negative $97 million, compared to positive $5 million in the prior year period.
Reorganization items, net of $334 million consist of expenses and gains and losses that directly relate to the restructuring process.
The above results produced a Net loss of $624 million, compared to $160 million in the prior year period.