Toys R Us has completed the inventory clearance it began earlier this calendar year (see "Toys R Us Loses $1 Billion"), helping to drive it to a $148 million loss in the quarter ended August 2, the company announced.  The company did manage a 2.7% sales increase (behind same store growth in both the U.S. and international for the second quarter in a row), and an increase in operating income.

The inventory clearance was part of a larger strategy called TRU Transformation, which  also includes improving in-stock positions, optimizing inventory, a clearer pricing strategy, and simpler promotions.  CEO Antonio Urcelay said he believes the changes "...should result in a much-improved shopping experience for our customers in the important months ahead."

With Toys R Us losing around $1 billion last year and shouldered with substantial debt, the company has been considered a risky bet for bondholders.  A group of bondholders has now been formed to push for a path to a refinancing, according to The Deal, beginning by lobbying for a change in the covenants for one group of bonds that comes due in 2018 that prevents using liens on the company’s assets as a source for new financing.  The first big chunk of debt comes due in 2016, but rates are low and the risks that the new TRU strategy will not succeed are substantial.  So it’s believed that clearing the way for a refinancing, possibly tied to the company’s real estate, is better done sooner than later.