After selling tainted toys, RC2
Problem is, the company began handing out the toys without thoroughly checking them. Turns out some of them also had too-high lead content, and now they're being recalled.
The company says it is embarrassed and wants to make it up to customers. Yet I'm not sure if its apology is truly the best approach to the situation, because it's planning to offer another gift. I mean, do parents really want another RC2 product in their child's hands after all of this, even if it's free?
As angry as parents must be right now with the toy maker, I can't help but wonder if HIT Entertainment, the company that licenses the Thomas & Friends name, will pull the license from RC2 for damaging the Thomas name. Of course, so many other toy makers are experiencing similar issues that there really aren't many alternatives right now. But I'm pretty sure the company has used up most of its lives, running the risk of completely killing both the reputation of its toys and the brands licensed to them.
Many brands have initiated new testing procedures to protect their names. Disney
Considering that 80% of the toys sold in the U.S. are made in China, parents considering a purchase this holiday season have limited options if they're thinking of looking for something "safe." Even Mattel
Mattel has been quoted as saying the holiday season will be just fine for it. Yet RC2 ran out of steam after its first recall was a lot more substantial than anyone had anticipated, and the cost of a second recall, even if it's far more limited than the initial one, will take a toll because Thomas makes up more than 10% of its annual revenue.
It will be interesting to see the long-term effects the recalls have on all of these toy makers' brands, especially now that the holiday shopping season is beginning. On one hand, parents are probably nervous about purchasing potentially hazardous toys for their kids. But then again, parents always strive to get their kids what they want. So I imagine it will be hard for them to deny their children the Thomas train they've been begging for.
Fool contributor Rich Duprey owns shares of Wal-Mart but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. Disney and Hasbro are Stock Advisor selections, and Wal-Mart is a recommendation of Inside Value. The Fool has an untainted disclosure policy.