* Q1 loss of 43 cents per share vs Wall St's 41 cent loss
* Q1 sales fell 49 percent to $29.9 million
* Sees "satisfactory" retailer inventory by early Q3
(Adds background, details on share performance, IPO,
additional CEO comments)
LOS ANGELES, May 4 Educational toy maker
LeapFrog Enterprises Inc LF.N posted a wider-than-expected
loss on Monday, with sales flopping after retailers slashed
inventory amid the worst economic downturn in decades.
The poor results were yet another blow to the interactive
toy company, once a Wall Street darling lauded for hyper
growth, that has seen its share price plummet 78 percent from
its 2008 high of $10.56 last September.
The Emeryville-based company, whose toys aim to teach
children reading, spelling and math, recorded a first-quarter
net loss of $27.1 million or 43 cents a share, versus a loss of
$27.4 million or 43 cents per share a year earlier.
Analysts, on average, had expected the company to post a
loss of 41 cents per share, according to Reuters Estimates.
Sales fell 49 percent to $29.9 million during the quarter,
but Leapfrog saw revenue improving over the course of 2009.
The company forecast second-quarter net sales of between
$35 million and $45 million and a gross margin of 30 percent to
33 percent. For the third quarter, it foresaw net sales of $100
million to $120 million and a gross margin of between 37
percent and 41 percent.
"Retailer inventory levels are expected to reach
satisfactory levels by early in the third quarter, and we
expect year-over-year sales growth to resume in the fourth
quarter," Bill Chiasson, LeapFrog's Chief Financial Officer,
said in a statement.
Toy companies have faced a tough time as the recession, job
losses and tighter access to credit force even indulgent
parents to cut spending on toys for their children.
As consumers clamp their wallets shut, retailers have also
pared inventories to unload excess merchandise and resorted to
deep discounting, exacerbating problems for toy manufacturers.
Backed by well-known banker Michael Milken, LeapFrog became
a Wall Street darling after its 2002 initial public offering --
at $13 per share -- but a string of dismal reports from the
company hurt its credibility with investors.
By 2003, the fast growth that attracted attention started
to backfire, as high operating costs bit and the company
admitted an over reliance on its LeapPad line of products -- a
junior-sized laptop-shaped system that holds interactive
workbooks teaching skills such as math.
In the following years, LeapFrog incurred a string of
earnings misses and warned repeatedly it would fall short of
targets, angering investors.
Leapfrog now has its work cut out trying to turn around its
flagging business in the middle of a recession.
Chiasson said consumers were continuing to seek bargains
and remained promotion-driven, adding the behavior was expected
to continue through the second quarter.
But he said Leapfrog was on track to reduce inventory
LeapFrog shares rocketed 22.3 percent to $2.30 in regular
trading on the New York Stock Exchange on Monday.
(Reporting by Lisa Baertlein and Alexandria Sage; Editing by