Standard & Poor's cut Toys R Us' credit rating on Wednesday, to BB, a lower, but still high 'junk' rating.  Profits were down 48% for the nation's largest toy chain in Q4 after a tough holiday season for specialty toy retailers (see 'Toy Fair Opens After Down Year' and 'Toy Store Holiday Season Sales Down') brought on by aggressive competition from discount chains.  A 22% decline in videogame sales led a 5.1% over-all decline in U.S. toy sales at Toys R Us stores open at least a year.  The retailing giant has retained Credit Suisse First Boston as a financial advisor for a 'strategic evaluation' of the company.

 

Toys R Us also announced that Office Depot would buy 124 of the 146 Kids R Us locations that were recently closed (see 'Wal-Mart Applying Toy Category Kill Shot') for $197 million in cash plus assumption of lease payments and other obligations.

 

The S&P statement announcing the rating cut succinctly described Toys R Us' situation.  'The ratings on Toys reflect the company's participation in the intensely competitive retail toy industry and its inability to find a differentiated niche within the industry,' it said.  Our translation -- 'Wal-Mart.'