Fisher-Price Gets Back to Basics--and Prosperity
Toy maker Fisher-Price learned painfully that there’s nothing quite like a grinning telephone or a bubble-blowing sax.
The world’s leading maker of toys for preschoolers is squarely back in the toys-for-tots market after a disastrous foray into products for older children.
That move cost the company millions and prompted Fisher-Price’s owner, Quaker Oats, to spin it off into a separate business in mid-1991 to escape the toy maker’s losses.
Now closing out its first full year as an autonomous company under new management, Fisher-Price’s revenue is up and its share of the preschool market is rising. Christmas sales have risen the last two years. And since the spinoff, the company’s stock has more than doubled, trading at $24.25 a share at the close of trading Thursday.
“What this management has done with the company is one of the great management achievements of the early 1990s,” said Matthew Diserio, an analyst who tracks the toy industry for PaineWebber. “They’ve taken a great business that was in terrible disarray and made it as strong as it could be.”
By the end of 1993, Diserio said, Fisher-Price will be in the strongest shape since it was created 62 years ago.
In the 18 months before the spinoff, Fisher-Price lost about $70 million. The company, based in East Aurora in Upstate New York, closed three plants and laid off hundreds of workers to streamline.
The downturn began after Fisher-Price posted record sales of $869 million in 1988. Quaker Oats was pushing the company to sell more. Fisher-Price already dominated the preschool market, so the company ventured into high-tech, high-priced toys for older children.
Fisher-Price spent millions developing such toys as a child’s camcorder and a mini-sports car, which retailed for about $300 each. The toys bombed. By 1990, sales fell to $613 million.
Fisher-Price quickly dumped the toys, and Quaker Oats quickly dumped Fisher-Price.
While Fisher-Price drained its resources in developing toys for older children, rivals such as Playskool and Mattel stole much of the young children’s market.
In the early 1980s, Fisher-Price had about 40% of that market, said Jill Krutick, an analyst with the Salomon Bros. investment firm. By 1990, the company’s market share had dropped below 30%, she said.
Since then, Fisher-Price has reclaimed some of that. Its share of toy sales for infants has climbed to about a third of the market, while its share of overall preschool toy sales has risen back above 30%.
The company has been updating many of its perennials, including its friendly-faced Chatter Telephone and its musical Bubble Sax saxophone. New toys such as Fisher-Price’s Dino-Roars stuffed animals and its Flip-Track railroad set have also been hits.
