Vornado Realty Trust
), a leading real estate investment trust (REIT), has recently
announced its share of first quarter 2012 financial results of Toys
'R' Us - a leading global retailer of dedicated toys and baby
Vornado Realty currently owns about 32.6% of Toys 'R' Us.
Vornado Realty will record its share when it reports its second
quarter results for the quarter ending June 30, 2012.
Vornado Realty's second quarter 2012 will include a loss of $19.2
million or 10 cents per share on account of Toys 'R' Us compared to
a loss of $22.8 million or 11 cents in the year-earlier quarter.
In accordance with the first quarter results of Toys 'R' Us,
Vornado Realty will also record a negative FFO (funds from
operations) before income taxes of $15.4 million or 8 cents per
share, compared to negative FFO before income taxes of $30.1
million or 15 cents in the year-ago quarter. Funds from operations,
a widely used metric to gauge the performance of REITs, are
obtained after adding depreciation and amortization and other
non-cash expenses to net income.
The business of Toys 'R' Us is highly seasonal with fourth quarter
accounting for over 80% of the fiscal net income, primarily due to
strong holiday sales.
For the quarter ended April 28, 2012, Toys 'R' Us reported net
sales of $2.61 billion compared to $2.64 billion in the year-ago
quarter. The year-over-year decline in net sales was primarily due
to a decrease in comparable store net sales, which dipped 0.8% in
the Domestic segment and 5.0% in the International segment.
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By product categories, the Learning and Core Toy division generated
strong performance, with net sales rising 6.7% and 4.7%,
respectively, while that of the Entertainment division that
includes videogame hardware and software slid 14.0%. Gross margin
for the reported quarter increased marginally to 38.2% from 37.1%
in the year-ago period.
New York-based Vornado Realty acquires, owns and leases office
properties, retail space and temperature-controlled logistics and
refrigerated warehouses. Besides its properties, the company also
has investments in other REITs, industrial buildings and Toys 'R'
Vornado Realty has a strong asset portfolio in two of the best
long-term office markets in the U.S. - New York City and Washington
DC. This provides the company a competitive advantage to
continually increase rents. The company also has a healthy balance
sheet and adequate liquidity.
We maintain our long-term Neutral rating on Vornado Realty, which
currently has a Zacks #3 Rank that translates into a short-term
Hold recommendation. We also have a Neutral recommendation and a
Zacks #2 Rank (short-term Buy rating) for
Boston Properties Inc.
), a competitor of Vornado Realty.