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Hornby warns on profits after its expensive toys fail to sell at Christmas

Big ticket items like Hornby and Scalextric hit by squeeze on consumer spending

Hornby shares have run out of steam as the model railway and Scalextric maker warned profits would be below expectations after a disappointing Christmas.

Cost conscious parents seem to have cut back on gifts, and if they bought expensive items at all, they were likely to be technology products such as iPads rather than racing car sets.

Hornby said pre-Christmas sales were below last year’s figures due to fragile consumer confidence:

In particular sales of high-ticket items such as our Hornby and Scalextric sets were affected adversely.
We recognised that trading conditions in the UK and the rest of Europe will continue to be challenging for the foreseeable future and are likely to continue to constrain sales of our high ticket items.

It is however proving extraordinarily difficult to predict sales accurately in these turbulent markets.

However we have taken steps to broaden our portfolio of products.

This includes increasing its range of lower price toys and adding on complementary products. At this week’s London Toy Fair the company showed its London 2012 Olympics merchandise, its Scalextric Star Wars products, a new range of Corgi toys for £1.99 each and Moshi Monsters badges and die cast vehicles. It also said its supply chain – which has been an issue in the past – was performing well.;

Hornby’s shares have lost 19.5p to 104p. Amisha Chohan at Merchant Securities said:

We are not surprised that high ticket price items such as Scalextric sets were severely hit. We believe consumers are moving away from high valued hobby items to either lower ticket price items or new technology such as the iPad2.

The group is now seeking to widen its portfolio to lower ticket items. However, we do not believe the group has a strong track record to secure top license brands.

We expect the market to downgrade 2012 forecasts from pretax profits of £7.4m and earnings per share of 13.6p. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds