Ahead of the Bell: LeapFrog hurt by weak holiday sales, lowers 3rd-quarter forecasts

MarketsAssociated Press

LeapFrog's stock is sliding in premarket trading Friday, as its preliminary results for the holiday season showed soft sales of children's tablets and lower-than-expected sales of LeapTV.

Late Thursday LeapFrog said that it anticipates a fiscal third-quarter adjusted loss of 25 cents per share on revenue of $145 million. Its prior guidance was for earnings of 16 cents to 28 cents per share on revenue of $220 million to $240 million. Analysts polled by FactSet predict earnings of 14 cents per share on revenue of $216.5 million.

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LeapFrog said that for the three months ended Dec. 31, sales of children's tablets fell more than expected in its major territories. Delays in shipping its new LeapTV educational video game system contributed to the product significantly missing sales expectations.

LeapFrog said that it expects its sales to drop in the fourth quarter, but did not provide a specific estimate. The company also withdrew its prior outlook for the fiscal year ending March 31.

Drew Crum of Stifel Nicolaus said in a client note that the company's new forecast for revenue of third-quarter $145 million suggests "one of the worst top line holiday performances for LeapFrog as a public company." The analyst said that only the third quarter of 2009 was lower, coming in at $138 million.

Crum kept a "Hold" rating.

Shares of LeapFrog Enterprises Inc. dropped $1.19, or 30.5 percent, to $2.71 in premarket trading Friday about an hour before the market open.