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LeapFrog Getting Into Wearables

Posted on Friday, May 30th 2014

According to an NPD Group research released earlier this year, retail sales of toys in the US fell 1% in 2013. Even in the last quarter of the year, despite a 4% increase registered during the week of Black Friday and  a 24% growth registered in sales during Cyber Monday last year, overall toy sales fell 1% over the  year. The biggest increase in toy sales was reported in the Youth Electronics segment which reported an 18% increase.

LeapFrog’s Financials
Educational toy manufacturer LeapFrog (NYSE: LF) is finding it difficult to perform in these depressed conditions. For the recently reported first quarter, LeapFrog saw revenues fall 31% over the year to $56.9 million. Q1 loss, however, was narrower than market projections. LeapFrog ended the quarter with a loss of $0.16 per share compared with the Street’s projections of a loss of $0.21 per share.

For the current quarter, LeapFrog projected revenues of $48 million-$52 million with a loss of $0.24-$0.21 per share. They expect to end the year with revenues of $554 million-$580 million and an EPS of $0.18-$0.25. The Street was projecting revenues of $50.8 million with a loss of $0.22 per share. For the year, the market had modeled an EPS of $0.20 on revenues of $556 million.

LeapFrog’s Expanding Offerings
LeapFrog continues to upgrade their product portfolio to ensure that their toys keep in line with the latest electronic trends. Their tablet offering, LeapPad Ultra has already been a big success as it was awarded the e-Connected Toy of the Year at the 14th annual Toy Industry Association’s Toy of the Year earlier this year.

Wanting to cash in on the growing demand of wearable technology, LeapFrog recently released LeapBand, a wearable gadget for kids. Known to be the first kid-focused wearable activity tracker of its kind, the LeapBand is aimed at getting kids to be more active while continuing to play fun games. The band has ten different preloaded activities and additional 40 free challenges that track a child’s moves. Points are earned based on the child’s activities to unlock additional games, challenges, levels of play, and virtual rewards for their on-screen pet. It includes features such as a built-in accelerometer, a high-resolution color screen, a rechargeable battery, and water-resistant design. The product is retailing for $39.99 a piece and is geared toward kids aged 4-7 years old.

Early last quarter, LeapFrog also entered into a partnership with Toys for Tots as part of its focus on supporting childhood literacy. Through their annual Family Reading Month donation campaign, LeapFrog will donate a book to the Marine Toys for Tots Foundation’s Literacy Program for every parent who pledges to read together as a family. LeapFrog has been partnering with other charitable organizations for a similar purpose over the last three years and has already donated more than $3 million in books.

Their stock is trading at $7.01 with a market capitalization of $488.6 million. It touched a 52-week high of $11.95 in August 2013.


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