LeapFrog FQ1 Sales Down 4%; Outlook Far Below Street Views

LeapFrog Enterprises, Inc. LF fell sharply in the extended session after the company posted a quarterly sales plunge of 43 percent and offered an outlook far below expectations. LeapFrog, which makes electronic entertainment products for children, said product launch delays and the discounting of unsold inventory hurt results for the recent quarter as well as its prospects for the current quarter. Unsold retail inventory from the 2013 Holiday season drove retailers to discount products, cut their new orders and require higher trade allowances from LeapFrog. "We expected a decline in our financial performance year-over-year," Chief Financial Officer Ray Arthur said in a statement. "But the decline in net sales and gross margin was slightly more than expected" because of discounting. LeapFrog cut quarterly operating expenses by 1.4 percent resulting in a net loss for the recent quarter that was "about what we expected," Arthur said. Sales fell 43 percent to $47 million, from about $83 million a year earlier. LeapFrog's net loss widened to $16.4 million, or $0.23 cents a share, from last year's $3.3 million or $0.05 cents a share. Analysts expected a loss of 21 cents a share on revenue of $50.8 million. For the quarter ending Sept. 30, LeapFrog forecast sales of $125 million to $130 million and a loss of $0.03 cents to $0.01 cent a share. But Wall Street anticipates earnings of $0.37 cents a share on sales of $215.8 million. After hours, LeapFrog changed hands recently at $6.85, down more than 7 percent.