• Strong product margins across all brands
• $2.7m Lease Bond Returned
• Strategic Partnership Established

Toys'R'Us ANZ Limited (ASX:TOY) is pleased to present its Quarterly Activities Report and Appendix 4C for the period ending 31 January 2025. Sales were significantly stronger than the previous quarter, up by $1.4m (approximately 160%), though somewhat constrained due to lower than planned inventory. Pleasingly, very strong product margins were maintained across all brands, with an overall margin of 34%, a 24% increase on 10% overall margin for the same quarter last year. The increased margins are being achieved primarily through the shift away from an historical reliance on deep discounting to drive revenue. The reduced level of ongoing overheads has been maintained. The company also received a $2.7m bond refund from the surrender of the head lease, which was used to invest in inventory across the company's core brands. Additionally, the company entered into a strategic commercial agreement with Directed Electronics Australia Pty Ltd, which is seen as pivotal to the transformation and growth journey. The partnership will enable the immediate execution of key strategic objectives including new product development, access to and development of exclusive products along with marketing and digital programs.

The company expects that operating cashflows will continue to improve in the next quarter due to the strategic initiatives delivered and in progress, including: continuing to improve the blended gross profit margin across the House of Brands businesses and a focus on profitable sales; right-sizing inventory to accommodate core brands, new products and house brands; maintaining the right-size overheads appropriate for the current business; and other corporate actions.

The company has taken a number of steps which have or are expected to result in significant additional cash, including a $5 million funding agreement with Mercer Street Global Opportunity Fund II LP, of which $1.215 million remains undrawn, and the company is working on a range of initiatives to raise further cash to fund operations, which are expected to be successful.