Topps Topples

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Today's news from Topps (Nasdaq: TOPP) soured what was an unspectacular yet solid 12 months for the candy and trading card company's shares, with the stock down more than 7% following the announcement of fiscal Q3 (ended Nov. 29) sales and earnings.

The sales numbers themselves weren't bad. Revenue increased to $78.6 million from $66.7 million for the quarter. But operating income fell year over year, and the company's new WizKids operation, picked up last summer for about $30 million in cash, hasn't delivered.

That latter point is probably what's really bothering investors. WizKids, which makes strategy-style board games using pint-size figurines, was to take Topps in a new direction. Unfortunately, its latest launch of "Creepy Freeks" hasn't gone well. (A new booster pack for its MechWarrior game, meanwhile, was to debut today.)

WizKids turned in a $3 million pre-tax, or $0.05 per share, loss for the quarter. Even a break-even quarter at WizKids would have boosted Topps' earnings per share significantly. (The company praised WizKids' contributions back in its Q2 release.)

Topps remains committed to WizKids over the long term -- unsurprising, since the $30 million it spent on the company would make up a full third of its current cash hoard. The company insists that it bought the operation as much for its game development acumen as for current product lines, so it's not panicking -- though it is projecting a further loss in fiscal Q4, and is already taking steps to reduce associated costs and stem the tide. This looks like a story to watch.

Are your kids clamoring for Creepy Freeks? Share your stories on our Topps discussion board.

Dave Marino-Nachison can be reached at dmarnach@fool.com.