Trick or treaters can go home now. Topps (NASDAQ:TOPP) doesn't want to part with its candy anymore. After seven months of unsuccessfully trying to sell its confectionery business, the trading card specialist has decided to keep it after all.
The decision came after Topps had received some degree of interest from potential buyers, but none in the price range that it was expecting. The company's confectionery business includes Ring Pop lollipops and Bazooka bubble gum.
Topps has had it rough lately. The company has posted a dip in sales in three of the past four years. Last year there was an uptick in its candy lines, so the company was hoping to find its own sugar daddy -- and, in the process, provide a little greenery to and focus on its flagship card business.
There certainly wasn't a shortage of possibilities. Topps' lines would have fit perfectly with Tootsie Roll's (NYSE:TR) popular Charm's Blow Pop line. Larger companies like Wrigley (NYSE:WWY), Cadbury Schweppes (NYSE:CSG), and Hershey (NYSE:HSY) also seemed like no-brainer hopefuls. Back in June, Wrigley completed a $1.5 billion acquisition of some of Kraft's (NYSE:KFT) confectionery lines.
In choosing to go it alone, Topps is streamlining its operations to further separate its card and games entertainment business from its candy businesses. It is looking to shave $2.5 million in annual overhead as a result of the repositioning.
Even though the stock is now trading near its 52-week low, shareholders may come to appreciate this decision. Topps already had a cash-rich balance sheet, so it's not as if it needed the money. More importantly, the company's confectionery business has provided a bit of financial stability here. The company's non-confectionery business suffered a 10% decline in sales in fiscal 2005 and was off a whopping 21% during the first quarter of fiscal 2006.
That's why keeping the sweet part of its business, literally and figuratively, makes sense -- given that none of its rivals were willing to pay up. As much as I value my Topps baseball card collection, I realize that it's not what today's kids are craving. I am hopeful that Topps' revival of Wacky Packages and its line of trading cards based on popular action properties like Star Wars and Batman may help turn the tide, but it hasn't worked out so far. That's why I don't mind if Topps decides to keep a Bazooka around -- whether or not it decides to load it.
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Longtime Fool contributor Rick Munarriz used to collect the original Wacky Packages stickers back in elementary school. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
