By Maria Armental 

Toys "R" Us Inc. said its strategy of more disciplined promotions and pricing led to a decline in sales at existing U.S. stores this holiday season but better profitability.

The toy retailer said sales at existing U.S. stores fell 5% during the recent holiday period. Despite the sales decline, Toys "R" Us said it saw an increase in gross margin dollars in its domestic segment.

"These results reflect the successful execution of our strategic plan to rationalize promotions, slow sales decline and improve margin for fiscal 2014," said Antonio Urcelay, chief executive of Toys "R" Us.

Including overseas results, Toys total same-store sales fell 2.7% during the holiday period.

The privately held retailer has struggled to hold its position amid stiffer competition from the likes of Wal-Mart Stores Inc. and Amazon.com Inc. Last year, it swung to a loss on write-downs and falling sales in the U.S. and abroad.

In response, Toys "R" Us launched a series of changes, including cutting the number of promotions and remodeling stores. Stores, for example, added prominent displays featuring popular toys and gifts under $30 to help drive sales.

In September, the company touted the changes saying it had recorded sales growth in the U.S. for the first half of the year on a same-store basis.

Based in Wayne, N.J., Toys "R" Us was bought in 2005 by Vornado Realty Trust and private-equity firms Bain Capital and Kohlberg Kravis Roberts & Co. for $6.6 billion.

Write to Maria Armental at maria.armental@wsj.com

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