Character Options Group, the toy developer whose brands include Dr Who, Bob the Builder and Zhu Zhu Pets, has issued a profit warning after poor UK sales.
While its international revenues are holding up, UK kids (and parents) are apparently not splashing out on its toys, leading retailers to slash prices and delay orders for new products. As a result Character said its full year figures would be below market expectations, although it believed its Christmas ranges would do well enough to get the next financial year off to a good start. It came up with a full house of excuses to account for its current woes:
affected by a number of factors and major events, namely, the Jubilee celebrations, the Euro 2012 Championship, the abnormally bad UK weather, the deepening eurozone crisis and the on-going impact of the Olympic games.Retail trading conditions have remained difficult and have been further adversely
Merchant Securities added one other thing: a shift from Character’s type of toys to more technology based products. Analyst Amisha Chohan said:
Although the group has a broad product portfolio with strong licenses including Bob the Builder and Mike the Knight, there is a shift in demand for toys towards technology. We do not believe the group has any key blockbusters for the current calendar year, which could prevent revenue growth from being achieved in 2013. A lack of appetite for Zhu Zhu Pets and the Squinkies continues to be a short-term hindrance for the group in terms of revenues and margins.
The broker has cut its recommendation from hold to sell and its target price from 170p to 119p. Meanwhile the company’s broker Charles Stanley cut its 2012 profit forecast from £9m to £7m, although it kept its buy recommendation. But the shares are currently down more than 10% at 122p.