Wal-Mart Reports Q4 and Full Year
Wal-Mart Stores, Inc., reported financial results for the fourth quarter and full year ended January 31, 2013. Net sales for the fourth quarter of fiscal 2013 were $127.1 billion, an increase of 3.9 percent from $122.3 billion in last year’s fourth quarter. On a constant currency basis, net sales would have increased 3.7 percent to $126.8 billion. Membership and other income decreased 7.8 percent to $815 million, due to lower other income. Total revenue for the fourth quarter was $127.9 billion, a 3.9 percent increase over last year.
Income from continuing operations attributable to Walmart for the fourth quarter was $5.6 billion, up 7.9 percent. Diluted earnings per share from continuing operations attributable to Walmart for the fourth quarter of fiscal 2013 were $1.67. The effective tax rate for the fourth quarter was 27.7 percent, which was lower than the company’s expectations, and compares to 30.9 percent last year. The fourth quarter effective tax rate benefited from a number of discrete tax items, including positive impact from fiscal 2013 legislative changes, most notably the American Taxpayer Relief Act of 2012. In comparison, EPS for the fourth quarter of last year were $1.51.
Fiscal 2013 Results
Consolidated net sales for the full fiscal year were $466.1 billion, an increase of 5 percent over fiscal 2012. Net sales included approximately $4 billion from acquisitions and approximately $4.5 billion of negative impact from currency exchange rate fluctuations. Membership and other income was $3 billion, a decrease of 1.6 percent from the prior year. Total revenue was $469.2 billion, an increase of 5 percent or $22.2 billion.
Income from continuing operations attributable to Walmart was $17 billion, a 7.8 percent increase from $15.8 billion last year. For fiscal 2013, EPS were $5.02 versus last year’s EPS of $4.54, an increase of 10.6 percent. The effective tax rate for the full year was 31 percent, compared to 32.6 percent for the prior year. This rate was below the company’s annual guidance of 32.5 to 33.5 percent, primarily due to the fourth quarter discrete tax items noted above.
The company leveraged operating expenses for the full year, including the $157 million of professional fees and expenses related to the ongoing Foreign Corrupt Practices Act (FCPA) matter.
“Fiscal year 2013 was the first year of our five-year plan to reduce operating expenses as a percentage of sales by at least 100 basis points,” said Charles Holley, executive vice-president and CFO. “We made progress toward our five-year goal, reducing expenses for the year by 14 basis points. Walmart U.S. led this effort. The entire company has rallied around this leverage challenge, and we expect we will continue to see progress towards this goal.”
During the fourth quarter, the company repurchased approximately 42.3 million shares for $2.9 billion, bringing the full year repurchases to 113.2 million shares for $7.6 billion. In addition, the company paid $1.3 billion and $5.4 billion in dividends for the quarter and year, respectively. For the year, Walmart returned $13 billion to shareholders through dividends and share repurchases.
LEGO Group Reports on 2012
The LEGO Group announced that in 2012 its revenue increased by 25 percent to $4 billion, which is nearly triple the sales of 2007. This represents the fifth consecutive year in which The LEGO Group delivered year-over-year revenue growth in excess of 15 percent. Key facts from The LEGO Group’s annual report for 2012 include:
• The year’s operating profit increased to $1.3 billion versus $1 billion in 2011.
• The operating margin increased to 34 percent from 30 percent in 2011.
• The year’s net profit increased to $969 million versus $776 million in 2011.
• The revenue increased by 25 percent to $4 billion versus $3.4 billion in 2011. In local currency (i.e. excluding the impact of foreign exchange changes) revenue increased 20 percent year over year.
• The net cash generated from operating activities was $1.1 billion against $666 million in 2011.
“It is a highly satisfactory result and better than we expected at the beginning of the year,” said Jørgen Vig Knudstorp, CEO of The LEGO Group, in a statement. “This is due, first and foremost, to the fact that we were able to develop and launch products that children all over the world have put at the top of their wish lists in 2012,” The company noted that more than 60 percent of the LEGO Group’s sales are new launches every year.
Increased demand for LEGO products in 2012 created significant challenges for The LEGO Group’s production, but the company’s strategy of locating its factories close to the core markets in Europe and North America showed its strength.
The company reported that its bestselling product lines in 2012 were LEGO City and LEGO Star Wars, followed by LEGO Ninjago, which was launched in 2011. The new product line, LEGO Friends, delivered a strategic milestone in 2012, selling much better than expected and becoming the fourth best-selling product line. Even though The LEGO Group more than doubled its production of LEGO Friends versus expectations, it was not possible to fully deliver all demand.
The company achieved its eighth consecutive year of U.S. growth as consumer sales increased 26 percent over 2011, driving its share of the overall U.S. toy market to 7.9 percent. The company’s share of the total U.S. toy market has quadrupled in five years.
With double-digit growth rates, North America, Asia, and Central and Eastern Europe delivered impressive results in LEGO sales in 2012, while the growth rates in some Southern European markets were more moderate but still in healthy single digits despite very challenging market conditions.
“We are very satisfied with the strong growth in Asia, especially driven by the appeal of LEGO Ninjago, LEGO Friends, and LEGO City. While Asia is a relatively small market for the LEGO Group, during the coming years we anticipate that it will become a new engine of growth,” said Mads Nipper, LEGO’s CMO, in a statement.
To prepare for future growth, The LEGO Group continued investments close to the core markets in 2012.
• In the Czech Republic, The LEGO Group announced a significant expansion of its existing factory in September.
• The building of a new factory in Hungary near the existing LEGO factory in Nyíregyháza was started in October.
• As a part of the strategy to make Asia a core market, a new Asian head office in Singapore launched in the fall.
• As a result of the strategy to locate packing facilities closer to core markets, The LEGO Group announced early in 2013 that packing facilities in Billund, Denmark, will close over the next 2.5 years. At the same time large investments will be made in molding and engineering capabilities in Billund.
In 2013 The LEGO Group expects that the global financial development will continue to impact the toy market in general. The financial situation in western and southern parts of Europe, and in North America, will continue to be under pressure, while Asia and eastern parts of Europe are expected to experience robust growth.
In 2013 there are high expectations for The LEGO Group’s major launch, which is LEGO Legends of Chima. It’s a play theme that takes place in a fantasy world populated by mythological animal tribes.
Jakks Pacific Reports Q4 and Year-End Results for 2012
Jakks Pacific, Inc., reported results for its fourth quarter and full year ended December 31, 2012.
Net sales for the fourth quarter of 2012 were $133.5 million, compared to $141.1 million reported in the comparable period in 2011. The reported net loss for the fourth quarter was $119.5 million, or $5.45 per diluted share, which includes a one-time non-cash charge of $91.7 million or $4.18 per diluted share, related to the impairment of deferred tax assets, and $0.8 million of pre-tax charges, or $0.03 per diluted share, related to legal and financial advisory fees and expenses associated with the unsolicited indication of interest and activist shareholder activities. This compares to a net loss of $20 million, or $0.77 per diluted share, reported in the comparable period in 2011, which included $1.9 million, or $0.05 per diluted share, of legal and financial advisory fees and expenses. Excluding the legal and financial advisory fees and expenses and the deferred tax asset impairment charge, the fourth quarter net loss in 2012 would have totaled $27.2 million, or $1.24 per diluted share, compared to a loss of $18.8 million, or $0.72 per diluted share, in 2011.
Net sales for the full year of 2012 were $666.8 million compared to $677.8 million in 2011. The reported net loss for the full year was $104.8 million, or $4.37 per diluted share, which included $4.8 million or $0.16 per diluted share of pre-tax charges and legal and financial advisory fees and expenses, and $91.7 million or $3.83 per diluted share, for the deferred tax asset impairment charge. This compares to net income for the full year of 2011 of $8.5 million, or $0.32 per diluted share, which included $3.8 million, or $0.09 per diluted share, of legal and financial advisory fees and expenses. Excluding the deferred tax asset impairment charge and legal and financial advisory fees and expenses, the full year 2012 results would have been a loss totaling $9.3 million, or $0.39 per diluted share, compared to earnings of $10.9 million, or $0.41 per diluted share, in 2011.
“We are disappointed by our performance in the fourth quarter,” said Stephen Berman, president and CEO, Jakks Pacific, in a statement. “The difficult and challenging toy environment did not generate the sales that had been anticipated, and several of our key products did not achieve the sales levels that we had planned for, also resulting in license royalty minimum guarantee shortfalls.”
Berman continued. “We believe that the difficult environment for toys in 2012 resulted from rapid changes in children’s play patterns as tablet and smartphone devices and interactive games and toys have become cornerstones of their play experience. We recognize that it is critical for us to provide new, more exciting and magical experiences for today’s child compatible with these new play patterns. We believe that our partnership with NantWorks in creating our DreamPlay line of toys using NantWorks proprietary iD recognition technology will place Jakks in the forefront of the play revolution we are witnessing.”
For 2013, Jakks anticipates an increase in net sales of 4 percent to 5 percent to approximately $694 million to $700 million, with diluted earnings per share in the range of approximately $0.63 to $0.68. This guidance anticipates first-quarter 2013 net sales in the range of $70 to $73 million, with a loss per share in the range of $0.83 to $0.85, which reflects 17.6 percent fewer common shares outstanding primarily as a result of the July 2012 self-tender of 4 million shares and includes incremental operating expenses associated with the recent acquisition of Maui Toys in a seasonally low sales volume quarter, and incremental operating and marketing expenses associated with the launch of our DreamPlay product lines. This is compared to net sales of $73.4 million and a loss per share of $0.62 per diluted share in the first quarter of 2012.
The Jakks Board of Directors has declared a regular quarterly cash dividend of $0.07 per common share payable on April 1, 2013, to shareholders of record at the close of business on March 15, 2013, reflecting a current annual yield of 2.1 percent.
As of December 31, 2012, Jakks’ working capital was $179.5 million, including cash and equivalents and marketable securities of $189.5 million, compared to working capital of $374.7 million including cash and equivalents and marketable securities of $257.5 million as of December 31, 2012.
Tamagotchi Now Available as an App
Bandai Co., Ltd. and its North American marketing representative Sync Beatz Entertainment announced the launch of the first-ever app based on Bandai’s Tamagotchi.
The free app, developed by Tokyo-based Namco Bandai Games, Inc., provides the toy’s classic game play in a contemporary format through its new Tamagotchi L.i.f.e. (Love Is Fun Everywhere) lifestyle brand. The app is currently available for download for Android devices throughout the U.S. and Canada and will soon be available on the iOS platform for the iPhone and iPad.
The companies say this app is an authentic recreation of the classic Tamagotchi, which originally launched in 1997. The app marks the latest offering from Tamagotchi L.i.f.e., a new line of lifestyle products.
The app offers players three distinctive Tamagotchi experiences to enjoy. The “toy” mode replicates the 16-bit black-and-white character pixels and all the familiar behavior and parenting tools of the original. The “app” mode presents an updated version with items to collect. There are also additional game modes. The app seamlessly enables owners to link with Facebook friends.
The app is the latest element of the multi-faceted Tamagotchi L.i.f.e. brand initiative, which began with its website launch in November, the kickoff of an original series of T-L.i.f.e. webisodes, and the establishment of the “Hometown Heroes” program, where fans can nominate someone making a measurable difference in their community, and the winner of each two-month voting period is awarded a $5,000 charitable contribution.
Scotts Miracle-Gro Signs Seltzer as Global Agent
The Seltzer Licensing Group announced that it has been signed by The Scotts Miracle-Gro Company as its exclusive global licensing agent. The Scotts Miracle-Gro Company is a global marketer of branded consumer lawn and garden products. Seltzer Licensing Group will be focusing its efforts on the Scotts, Miracle-Gro, and Ortho brands.
Spin Master, Patch Distribute Perplexus
Spin Master has acquired the worldwide distribution rights for Perplexus starting April 1, 2013. Spin Master’s mass market line will consist of Perplexus Rookie, Original, Epic, and Twist versions.
Spin Master will implement a marketing campaign this fall featuring Perplexus.
Additionally, Patch Products has acquired the rights to distribute the Perplexus Rookie, Original, Epic, and Twist versions for the independent toy and gift market.
Perplexus was previously with PlaSmart.