LeapFrog Shares Collapse On Q3 Warning

LeapFrog Enterprises, Inc. LF shares fell more than 34 percent after the company posted preliminary third-quarter results far below expectations.

The digital toy company withdrew its full-year guidance and said it is reviewing strategies, operations and cost structure to improve its financial performance.

A shortfall in sales of computer tablets designed for children was at the heart of disappointing third-quarter performance, according to the company, which is evaluating current inventory levels in light of weak holiday performance.

Along with slower tablet sales, the company blamed later-than expected shipments of its LeapTV educational video game system because of "development issues."

Also at fault according to LeapFrog were recent changes in inventory practices by retailers as well as the West Coast port slowdown in the United States.

The company expects a third-quarter loss for the period ended December 31 of $1.77 a share, compared with its earlier forecast of net income of $0.16 to $0.28 a share.

Results will include charges of $0.28 a share for goodwill impairment and $1.24 a share for a deferred tax asset valuation allowance.

Third-quarter sales will be $145 million, compared with prior guidance of $220 million to $240 million.

Wall Street expected earnings of $0.19 a share on sales of $226.07 million.

LeapFrog changed hands recently at $2.70, down 30.7 percent.