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Toys R Us to close 64 stores

Firm will also cut 1,900 jobs to trim costs, boost profits

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TRENTON, N.J. — Toys R Us Inc. plans to eliminate 1,900 jobs and close 64 stores as part of a plan to cut costs and boost profits.

The moves announced Monday come as the Paramus-based company's earnings have slumped due to the economic slowdown, extensive remodeling costs and fallout from the Sept. 11 terrorist attacks.

Toys R Us, the second-biggest U.S. toy retailer after Wal-Mart Stores, said it will take a $213 million pretax restructuring charge in its fiscal fourth quarter, which ends Feb. 2.

The company said the cuts would increase cash flow in 2002 and beyond and boost pretax earnings by about $25 million in 2002, and about $45 million annually beginning in 2003. Payroll savings associated with consolidating support services would account for $30 million of the $45 million.

"The senior management and the middle management all agree it's time to become much more professional, much more streamlined," John Eyler, chairman and chief executive, told analysts in a conference call.

At the same time, Toys R Us is phasing in new designs in some stores and testing new concepts, such as stores that sell groceries or that combine kids' and baby apparel and other products with toys.

In morning trading on the New York Stock Exchange, Toys R Us shares were up 5.9 percent, or $1.11 a share, at $19.86.

The layoffs include about 1,350 people from the stores being closed and about 550 from streamlining support services. The company did not immediately provide a current total of employees.

The company said it will close 27 Toys R Us stores that were making money, but not enough to justify extensive renovations to its latest format, dubbed Mission Possible.

Meanwhile, 37 Kids R Us stores will be closed, but most will become part of a combination store in the nearest Toys R Us location.

The company did not identify which stores are being closed and said 10 of the Toys R Us stores being closed may be relocated. The company has 1,609 stores under various names overall.

It said support services will be consolidated by closing five New Jersey facilities — two in Montvale and one each in Paramus, East Hanover and Fort Lee — and moving their work to a new facility in Wayne between this summer and summer 2003.

Toys R Us had a third-quarter loss of $44 million, or 22 cents per share. For the first nine months of its fiscal year, the company posted a loss of $91 million, or 46 cents per share.

For its fourth quarter, analysts surveyed by Thomson Financial/First Call have forecast a profit of $1.39 per share, giving the company a profit of 94 cents for the fiscal year.

Toys R Us operates 703 toy stores in the United States, 510 international toy stores, 184 Kids R Us children's clothing stores, 163 Babies R Us stores and 49 Imaginarium stores.