Toys R Us has 684 stores in the US

The firm made a profit of $61m(�33m) in the three months to the end of July set against a $11m(�6m) loss over the same period last year.

Despite returning to the black, the firm's sales fell 3.9% while core like for like sales at its US toy stores, excluding new stores, slumped 7.7%.

Toys R US is reviewing its business as it fights tough competition.

Rigorous re-evaluation

The company revealed earlier this month that it was considering a number of measures to revive its fortunes.

These include spinning off its fast growing juvenile subsidiary, Babies R Us, and even selling its core business.

The toy retailer has struggled in the face of fierce competition from discount operators such as Wal-Mart.

It is looking to make cost savings of $125m by 2005.

Second quarter earnings were boosted by a $200m positive reappraisal of the firm's income tax reserves.

This offset $228m in exceptional costs relating to store closures and restructuring.

The next 120 days are key for the global business John Eyler, Toys R Us

Total sales over the period fell to $2.02bn from $2.10bn last year. Like for like sales at Babies R Us were up 1.8%.

Chief executive John Eyler said it would be several months before the future strategic direction of the business became clear.

"The past few months have been a time of rigorous re-evaluation for Toys R Us," he said.

"The next 120 days are key for the global toy business."