The firm’s US division said it had lower than expected preliminary net sales during the fourth quarter.
Net sales from continuing operations for the final three months of 2006 were “flat to slightly down” when compared to the previous year’s fourth quarter, with profit margins suffering from the increased cost of die-cast materials.
Sales were also hurt by “lower than expected levels of reorders across all product categories in November and December.”
Consequently it is discontinuing its Racing Champions, JoyRide, Ertl and AMT die-cast and model kit automotive collectible product lines to focus on its Lamaze and Learning Curve brands. It will continue to produce John Deere-licensed die-cast and its Johnny Lightning die-cast line, which will be repositioned to target younger consumers.
“For the full year 2006, despite significant declines in our collectible products category, we did achieve overall organic sales growth,” noted Curt Stoelting, RC2’s CEO. “Sales growth excluding sold businesses and discontinued product lines was approximately 12 per cent, driven by increases in both our higher growth infant products and children's toys categories. Unfortunately, the impact of cost increases in zinc throughout the year reduced profit margins.”
He added: “As we begin 2007, we have an improved and increased focus on growing our infant and children's toy product categories and are much less dependent on our collectible products category. We have made some tough decisions in the short term but we believe we are now better positioned for growth in 2007 and beyond.”