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Toys 'R' Us posts profit but sales off 3.9%

Tax reserves help 2d-quarter results

NEWARK -- Toys "R" Us Inc. swung to a profit in the second quarter, boosted by a reversal of $200 million in income tax reserves, but overall sales fell 3.9 percent and its US toy business posted a big operating loss.

Chairman and chief executive John Eyler said yesterday that the company, which said earlier this month that it is considering selling its worldwide toy business, did not expect to have a decision on its next step for "a number of months."

"The past few months have been a time of rigorous reevaluation for Toys 'R' Us," he said during a conference call with analysts. "We move forward now with renewed focus on our two distinct businesses, Babies 'R' Us and the global toy business. And all of us realize the next 120 days are key for the global toy business."

Toys "R" Us, the number two US toy seller, has struggled with fierce competition from discounters, particularly industry leader Wal-Mart Stores Inc. It said Aug. 11 that its plans also could include a spinoff of its fast-growing Babies "R" Us unit, which sells furniture, apparel, and accessories.

The possible retreat from its core toy business comes after Toys "R" Us has spent millions to renovate its stores and sought exclusive rights to certain toys to differentiate itself from the discounters, whom it couldn't beat on price.

Toys "R" Us will most likely wait until after the holiday season to set its future course -- including any store closings, analysts said.

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