Consolidated net sales were $11,540m, a decrease of $262m compared to the previous year.
The decline in sales was primarily attributed to domestic store closures, including the Times Square and FAO Schwarz flagship stores, as well as a decline in consolidated same store sales. During 2016, Toys R Us opened 29 domestic stores, which included 27 outlet and express stores, and closed 16 stores. Internationally, the retailer opened 73 stores and closed 17.
Consolidated same store sales decreased by 1.4%. Domestic declined by 1.3%, mainly attributable to the entertainment (which includes electronics, video game hardware and software) and baby categories, partially offset by an improvement of 2.5% in the toy category. International decreased by 1.6%, driven by declines in the Europe and Asia Pacific markets, partially offset by growth in Canada. The international decline was attributable to the entertainment, seasonal and core toy categories, partially offset by an improvement in the baby category.
Operating earnings were $480m, compared to $447 million in the previous year. International operating earnings improved by $26 million, mainly due to a reduction in operating expenses. Corporate overhead was $46 million lower, primarily due to a reduction in annual bonus expenses. The improvement in operating earnings was partially offset by a decline in domestic operating earnings of $39 million, due to decreased gross margin dollars.
Dave Brandon, chairman and chief executive officer, commented: “Despite a strong start to the holidays, in the weeks following Black Friday we faced a combination of sluggish sales and intense promotional activity. The widely recognized tough retail environment this holiday and continued weakness in the entertainment and baby categories contributed to the erosion of our top-line and an overall disappointing year. However, with 2017 already well underway, we remain focused on improving in every area of our business. We have a number of important initiatives planned this year, including the launch of our new webstore and the expansion of our joint venture with Fung Retailing in Asia, and some exciting plans with several of our vendor partners to bring innovation and excitement to our customers.”