World of Wonder Reports Big Loss
Worlds of Wonder Inc., which filed for federal bankruptcy protection in December, said Monday that it lost a record $129.3 million in the final three months of 1987, due largely to slumping sales.
The troubled toy manufacturer also blamed production delays, which made some items unavailable for the Christmas season, and said price-cutting and high advertising costs contributed to the loss.
The $129.3-million after-tax loss on sales of $37.1 million compared with year-ago earnings of $15.2 million on sales of $132.8 million.
The company’s stock, which reached a high of $29 per share in June, 1986, fell 31.5 cents to close at $1.0625 on the over-the-counter market Monday.
Donald Kingsborough, chairman and chief executive officer of once-prosperous WOW, was upbeat despite the poor results and said there has been a good industry response to its new summer products.
He noted that four of the company’s products--Teddy Ruxpin, Little Boppers, Julie and Lazer Tag--were among the top 15 best-selling toys according to an industry survey for November and December.
A dramatic falloff in sales late last year, however, forced the company to set aside $63.7 million in the quarter for costs related to merchandise price cutting, surplus goods and expenses in liquidating a Hong Kong subsidiary.
“It’s mind-boggling,” said Robert Rebitz, an analyst for Davis-Skaggs Shearson in San Francisco, of the 350% sales decline from the final quarter of 1986. “I don’t know how it incurred a loss that large on that sales level.”
WOW filed three months ago for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code. A hearing is scheduled in federal bankruptcy court in Oakland on March 28 to discuss financing.
Rebitz said the company has a “50-50” chance of negotiating an agreement with creditors that would enable it to keep operating.
WOW said it has liabilities of about $223.6 million and an equal amount in assets.
Analyst Stephen Handley at Smith Barney, Harris Upham & Co. in New York said WOW has some creative ideas “but the question is whether the company has the financial wherewithal to capitalize on these ideas.”
