Leapfrog Continues To Execute

According to market researcher The NPD Group, traditional toy sales in the U.S. remained relatively flat during the first half of 2010 with total sales of $7.771 billion compared with $7.748 billion a year ago. In Europe’s five largest toy markets, France, Germany, Italy, Spain, and the U.K., revenue increased 5% over the year led by 8% growth in the U.K. Meanwhile, electronic toy maker Leapfrog (NASDAQ:LF) has been having a good run.

Leapfrog’s Financials
Q3 revenues grew 23% over the year to $138 million and exceeded the market’s projected $132.8 million. EPS for the quarter of $0.24 was also higher than previous year’s $0.11 and the Street’s projected $0.18. U.S. sales increased 23% over the year to $110.8 million and international sales grew 23% over the year to $27.2 million.

For the year, the company projected revenue growth of 15%–20% over the year and EPS of $0.20–$0.30. The market was looking for EPS of $0.27.

Leapfrog’s Holiday Plans
For the holidays, Leapfrog has released new educational toys. For 0 to 3-year-olds, their Twinkle Twinkle Little Scout, a 2010 Toy Insider “Top 20” toy, reads out first words and counting rhymes to the child. For the same age group, the Scout series has been enhanced by My First Book collection, which not only has sturdy, chunky pages but also works with Tag, their reading product. The same book can thus be used by older children with their Tag handheld reader. Tag is already one of the leading educational toys in the market.

For children aged 4-9, the Leapster Explorer is one of the leading toy picks for the year. The Explorer is a handheld gaming device which comes with some pre-loaded video games and the option to add games from Leapfrog’s library of over forty games and downloadable learning apps that include videos and flash cards. The catalogue of downloadable e-books also converts it to an e-reader.

Leapfrog recently launched the Leapster Explorer Camera & Video Recorder which converts the Explorer into the child’s digital camera, adding a visual aspect to learning math and reading. The camera lets kids take photos or movie clips, edit them using Leapster’s stylus, and create puzzles or stories. It helps children identify various shapes associated with their photographs, count them, and even convert them into alphabet or numbers.

To prepare for the holiday season, Leapfrog has also expanded their advertising spend and market presence. Their products are now also available in food and drug stores. They also tapped into their credit facility by $20 million to stock up for the season.

The stock is trading $6.23 with a market capitalization of $402 million. It touched a 52-week high of $7.51 in April of this year.