There's no denying that LeapFrog Enterprises (NYSE:LF) has been more of a toad than a prince in recent years. The company that made electronic learning toys cool has fallen on hard times, and earlier this week the stock hit a new two-year low.
The struggling toy maker is scheduled to report fresh financials on Monday after the market close. LeapFrog's fiscal second-quarter results aren't likely to be pretty, so let's go over a few items investors should keep an eye on.
1. Brace yourself for ugly numbers
Analysts see LeapFrog's consolidated net sales plunging 36% from a year earlier to $128.7 million. That's brutal, but it's actually better than the 43% drop the company reported in its fiscal first quarter three months ago. Domestic sales fell even harder.
Things don't get any better on the bottom line, with analysts holding out for a small deficit. A loss of $0.01 a share might not seem so bad, but it reverses the $0.37 per share profit from a year earlier. LeapFrog used to routinely beat Wall Street profit targets, but it posted a larger loss deficit than the pros expected last time out. No one would be shocked if it happened again given LeapFrog's recent disconnect with young families and investors.
2. Looking for life in the LeapPad line
LeapFrog had a short-lived renaissance in 2011 when it introduced the LeapPad tablet. Moving away from the company's classic learning toys, the kid-friendly tablet was a hot holiday item -- even though limited to running LeapFrog's apps and lacking unrestricted Web access. The price was right at $100, especially for parents worried about handing their kids pricier tablets with unchecked access to cyberspace. The LeapPad 2 was a hit in 2012, but by the time the line evolved to the LeapPad Ultra last year the market was shot.
Mainstream tablets were too cheap, and Ultra's original $150 price -- higher than the early models because it offered kid-friendly Wi-Fi access -- kept its success in check. This year's LeapPad 3 and LeapPad Ultra XDi might be too little, too late. Even Apple's (NASDAQ:AAPL) iconic iPad has suffered through three straight quarters of year-over-year sales declines.
There's no reason to expect LeapFrog's learning tablets to show spiking popularity in Monday's report. That would be a sport bent on disappointment. However, investors will want to tune in to see if LeapFrog has a feasible plan to get the LeapPad growing again. It might be too late.
3. Hold out hope for a hot new product line
LeapFrog isn't standing still. It has entered two new product categories recently with LeapTV and LeapBand.
LeapTV is a motion-based video game console for kids. That seems like a hard market to crack out of the gate, and the $150 price won't help. We saw that LeapFrog parents weren't keen on going that high for LeapPad Ultra, and investing in a console is also an investment in the long-term viability of a platform. It just hit the market a few days ago, after the fiscal second quarter ended.
The bar of resistance should be lower for LeapBand, the $40 fitness tracking bracelet for kids. Wearables are the new craze in tech, and if LeapFrog's ability to follow Apple into a trendy market with a low-price product for kids was a hit for the LeapPad in 2011, it could work for the LeapBand in 2014. We'll see if LeapFrog has any information to offer on either product or anything else that it could roll out in the near future.
The clock is ticking on LeapFrog. With analysts clinging to hope that sales will start growing again during the holiday quarter, its outlook needs to impress.
Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Apple and LeapFrog Enterprises. The Motley Fool owns shares of Apple and LeapFrog Enterprises. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.