Size mattered for Equity Marketing Inc., a Los Angeles-based toy maker that produced such items as plush toys, key chains and mugs tied to Sony's May release of "Godzilla." The much-hyped movie turned out to be a disappointment for Sony, and a major problem for Equity: On Thursday, Equity warned that its third-quarter earnings might decline as much as 87% from a year before due to poor sales of "Godzilla" and weakness in the Asian and Latin American markets.
Equity's stock plummeted 45%, closing at $7.87 on Nasdaq. The closing price is down nearly 75% from Equity's 52-week high of $30.75 one year ago.
Equity was one of about 200 licensees on "Godzilla," which was also emblazoned on T-shirts, bedsheets and many other items. Privately held Trendmasters, based in St. Louis, was the primary toy maker.
"We believed--and everyone's expectation was--that the movie would be a blockbuster," said Donald Kurz, president and co-chief executive of Equity, in a phone interview Thursday. "We took what we thought was a very conservative inventory position--less than $10 million [worth of product]--but clearly, it turned out to be a disappointment for us."
Kurz said Equity--which started as a maker of small "premium" items for such clients as Burger King--would continue to produce premiums tied to high-profile movies but would take a more cautious stance toward toys tied to such films. Instead, Equity will focus on more "evergreen" properties that might produce a smaller but steadier stream of business. These include such long-standing characters as Scooby-Doo and Woody Woodpecker.