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Toys 'R' Us cancels IPO

March 29, 2013: 2:31 PM ET

130329142307-toys-r-us-store-340xaToy retailer scraps $800 million stock offering.

FORTUNE -- Toys 'R' Us is still selling plenty of Elmo dolls, but it isn't planning to sell shares anytime soon.

The New Jersey-based retailer today withdrew registration for an $800 million IPO, which it had originally filed back in May 2010. A press release cites "market conditions" -- an odd choice, given that the Dow is at a record high. It also probably didn't help that CEO Gerry Storch is on his way out the door, and no successor has been picked.

But the big problem for Toys "R" Us was weakening financial performance. Net sales for fiscal 2012 (ending Feb. 2, 2013) were $13.5 billion, down 2.88% from the prior year. This included a 3.5% decline in domestic comparable store net sales and a 5% fall-off among international comparable store net sales -- buoyed  only slightly by the opening of new international locations (including in China). Also worth noting that the fiscal 2012 reporting period actually included one more week than did fiscal 2011, which resulted in around $152 million of extra revenue.

Earnings fell from $149 million to $38 million, largely due to tax expenses. Interest payments rose slightly from $442 million to $480 million, while adjusted EBITDA was off by $39 million.

In short, not the type of growth profile that gets rewarded by the public markets in an IPO.

Underwriters on the proposed offering included Goldman Sachs (GS), J.P. Morgan (JPM), BoA Merrill Lynch (BAC) and Credit Suisse (CS).

Toys 'R' Us was taken private in 2006 by Bain Capital, Kohlberg Kravis Roberts & Co. (KKR) and Vornado Realty. A Toys "R" Us spokeswoman declined to comment, referring us instead to Bain or KKR. Messages have been left with both.

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Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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