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Toys “R” Us Inc. is completing plans to once more operate its own e-commerce sites following its successful suit against Amazon.com to terminate a multi-year processing and merchandising agreement.
As a result of a decision handed down in March by New Jersey Superior Court judge Margaret Mary McVeigh, Toys “R” Us will terminate its e-commerce and merchandising agreement with Amazon.com by late this month or early next. The two companies signed their agreement in August 2000. “We fully expect a smooth and seamless transition to our own independent web site at the end of the 90-day termination agreement,” says a Toys “R” Us spokeswoman.
The Toys “R” Us suit alleged that Amazon violated a contract that granted ToysRUs.com exclusivity in the toys, games and baby products category on Amazon.com. Toys “R” Us says it is now talking with a number of potential retail web site partners and fulfillment service providers.
In addition to ToysRUs.com, the company also operates SportsRUs.com and BabiesRUs.com, which generated combined web sales of $429 million in 2005, up 17% from $366 million in 2004. “Tighter integration of our online business with our bricks-and-mortar locations will enhance customer service by creating a more unified web and retail shopping experience,” says senior vice president John Sullivan.
Amazon says it will appeal the court decision. The loss of the Toys “R” Us contract also could have a significant impact on its second quarter and full-year earnings, Amazon says.
“If we do not prevail, operating profit could be negatively impacted by as much as $50 million for the year, including as much as $25 million in the second quarter,” Amazon says.
Amazon is forecasting net sales to total between $9.95 billion and $10.5 billion for 2006, while net income is expected to be between $390 million and $520 million. In 2005 Amazon posted net income of $359 million on net sales of $8.5 billion.