LeapFrog loses in Q1
By Staff -- Gifts and Dec, 5/5/2009 9:27:00 AM
EMERYVILLE, Calif.—LeapFrog Enterprises reported a slightly smaller net loss in the company’s fiscal first quarter despite seeing net sales sag 49 percent.
The company’s net loss for the three months ended on March 31, 2009, was $27.1 million, or $0.43 per share, compared to $27.4 million, or $0.43 per share, a year ago.
Net sales for the quarter were $29.9 million, off 49 percent from the corresponding period of 2008, with results driven downward by lower product shipments to retailers due to high retailer inventory levels at the end of 2008. Net sales were also down due to lower sales to schools as a result of the strategic restructuring of the company’s school business last year.
Net sales from the United States segment for the quarter were $22.3 million, down 51 percent compared to the year ago period. International net sales were $7.6 million, off 40 percent. Excluding the impact of currency fluctuations, the decline in international sales would have been 27 percent.
“First quarter results were as we anticipated given the seasonally low sales period and high retailer inventory levels at the end of 2008,” said Jeffrey Katz, LeapFrog’s chairman and CEO, adding: “Channel inventory remains higher than normal, and we are actively working with retailers to reduce inventory to satisfactory levels by adjusting our promotional strategies and marketing plans.”
According to Katz, the company’s retail point-of-sale results were up 8 percent in the first 16 weeks of the year due to “solid” sales of its Tag and Leapster products. “POS results were favorable throughout the first quarter and particularly encouraging over Easter in the second quarter,” Katz said. “While we are optimistic about POS results to date, we realize that today’s consumer remains promotionally driven and is seeking deals. We expect this behavior to continue through the second quarter.”
LeapFrog’s gross profit for the quarter was $8.1 million, down 62 percent as a result of lower sales. Gross margin for the first quarter 2009 declined by 9.2 percentage points to 27.1 percent due to lower sales relative to fixed costs and promotions to reduce retailer inventory levels, offsetfavorably by a mix of higher-margin products.
Operating expenses for the quarter were slashed 30 percent to $35.0 million, helped by a 35 percent cut in selling, general and administrative expenses, an 18 percent drop in research and development costs and a 53 percent decline in advertising expenses. The company’s loss from operations for the quarter improved 6 percent to $26.9 million.
LeapFrog expects its net sales for the second quarter to range from between $35 and $45 million, and for the third quarter to come in at between $100 and $120 million, representing declines for both quarters of 35 to 50 percent relative to the prior year.
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