UPDATE 2-LeapFrog Q1 loss wider-than-expected, shares tumble

Mon May 3, 2010 5:40pm EDT

* Q1 loss $0.37 a shr vs est loss $0.28

* Q1 sales rise 42 percent to $42.4 mln

* Sees Q2 loss widening

* Sees Q2 sales grow 20 pct to 25 pct

* Shares fall 14 pct

(Recasts, adds estimates, details, analyst comment)

By Vidya Lakshmi

BANGALORE, May 3 (Reuters) - Interactive toy maker LeapFrog Enterprises Inc (LF.N) posted a wider-than-expected first-quarter loss, hurt by higher expenses and forecast a wider second-quarter loss.

Shares of the Emeryville, California-based company, which have more than doubled in the last three months, were trading down 14 percent at $6.15.

"The shares are down a little bit after-market... The results were still solid, showing improvement, the stock has done well over the past three months so being back down today is not a concern," Wedbush Securities analyst Edward Woo said.

For the first quarter gross margins at LeapFrog was 29.3 percent, up 2.2 percentage points.

"It was lower than we expected, but all the measures are showing improvement," analyst Woo said on gross margins.

The company, which sells interactive learning toys and books covering subjects from math to music, posted a net loss of $23.6 million, or 37 cents a share, compared with $27.1 million, or 43 cents a share, a year ago.

Excluding items, it posted a loss of 33 cents a share.

Revenue jumped 42 percent to $42.4 million.

LeapFrog forecast second-quarter net sales to increase 20 percent to 25 percent with gross margins of between 35 and 38 percent.

The company, whose rivals include Mattel Inc (MAT.O) and Hasbro Inc HAS.N, forecast full-year revenue growth of between 10 percent and 20 percent.

Selling general and administrative expenses grew 6 percent to $21.1 million.

The company's shares closed at $7.12 Monday on the New York Stock Exchange. (Reporting by Vidya Lakshmi in Bangalore; Editing by Jarshad Kakkrakandy)