VTech sales slip in full year results

VTech reports its annual results for the year ended March 31st, reporting lower revenue and profit.
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The Electronic Learning Products (ELP) business saw sales decrease by 7.9 per cent to $566.9 million. This is equivalent to 39.1 per cent of total group revenue, as compared to 39.7 per cent in the previous financial year.

After a solid first half, the firm experienced the effects of a deterioration of the economy in the second half. This led to softening of consumer demand, and necessitated aggressive retail level promotions.

North America and Europe were the markets most affected by the slowdown. Sales to North America dropped 5.7 per cent, while sales to Europe declined 12.7 per cent. Results from the European operations were further impacted by the steep depreciation of the Euro and Sterling against the Dollar.

Results from Asia Pacific and other markets were more promising, with revenues increasing by 13.3 per cent and 21.5 per cent, to $12.8 million and $20.9 million respectively.

Standalone products played a significant role, accounting for 64 per cent of total ELP revenue, against 57 per cent in the financial year 2008. The infant category showed the strongest growth. Among pre-school products, the Kidizoom Camera continued to sell well.

Platform products, led by the V.Smile range, accounted for 36 per cent of total ELP revenue, compared to 43 per cent in the previous financial year.

Three new products, V-Motion, Cyber Pocket and PC Pal were added to the V.Smile brand. As the new flagship console, V-Motion met sales expectations in spite of a challenging year for new products.

Allan Wong, chairman and group CEO of VTech Holdings said: "To respond to the sudden change in market conditions, VTech moved swiftly to step up retail level promotions to stimulate sales.

“Although margins were affected, it enabled VTech to end the full year with lower inventory than last year. In addition, our balance sheet remains strong, with our net cash position slightly ahead of the previous financial year. Our decisive and aggressive action enabled us to establish a solid financial position from which to move forward."

Looking ahead, consumer sentiment is expected to remain weak throughout most of 2009. To drive growth, the firm plans to continue to pursue its strategy of product innovation, gains in market share, geographic expansion and operational excellence.

VTech predicts that the market for ELPs is likely to remain challenging, and consumers are expected to look for deals. In response, the firm will step up efforts to deliver products that offer value.

Across its ranges, the group will continue with aggressive retail promotions. Margin pressure is expected to be partially offset by lower raw material costs, especially of plastics.

Product innovation will remain important in driving sales. For standalone products, VTech is introducing Jungle Gym, which continues the push outside the learning aisle, giving the business new avenues for growth. Platform products will be augmented with a new reading system, Bugsby.

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