Etch a Sketch at Center of Republican Politics; Ohio Art Responds
Ohio Art’s Etch a Sketch is finding itself at the center of U.S. politics. A seemingly simple question posed by CNN to Eric Fehrnstrom, a senior aide for Republican presidential hopeful Mitt Romney, has set off a firestorm of controversy.
When Fehrnstrom was asked whether Mitt Romney’s positions in the primary might be too far to the right to win in November, Fehrnstrom said on CNN, “Well, I think you hit a reset button for the fall campaign. Everything changes. It’s almost like an Etch A Sketch. You can kind of shake it up and restart it all over again.”
That comment has been fodder for the Republican hopefuls who insist it means that Romney will change his platform if the former Mass. governor wins the Republican nomination for President of the United States.
Regardless of what Fehrnstrom meant, or how it gets dissected by the pundits over the next few days, the unexpected publicity for the classic toy is putting a smile on the faces of those at Ohio Art. Needless to say, the rest of the Republican hopefuls are now referencing the toy, handing it out, and have been seen holding it while on the campaign trail. Others who do not support Romney’s views are now adopting the toy as a symbol.
Ohio Art released this statement in response to the controversy. “We are happy to see Etch A Sketch DRAWING attention with political candidates,” says Martin Killgallon, senior vice-president of marketing and product development for The Ohio Art Company. “This highly recognizable toy, loved by all, is now SHAKING up the national debate. Nothing is as quintessentially American as Etch A Sketch and a political debate.”
TRU Reports Q4 and Full Year 2011
Toys “R” Us, Inc., (TRU) reported financial results for the fourth quarter and full year of fiscal 2011 ended January 28, 2012. For the fourth quarter, the company reported net sales of $5.9 billion, adjusted EBITDA of $749 million and net earnings of $343 million.
Jerry Storch, chairman and CEO, Toys “R” Us, Inc., said in a statement, “We are pleased with the company’s success in delivering our third consecutive year of adjusted EBITDA in excess of $1 billion, and with the net earnings growth we realized in the fourth quarter. Importantly, we also increased our gross margin rate during the year through our strategies to expand exclusive product offerings and deepen relationships with manufacturers.”
Storch added, “We continue to see sales and operational benefits from the integration of our juvenile and toy offerings under one roof. During the year we further invested in and strengthened our omnichannel and internet capabilities, providing increased speed and multiple ways by which customers can now order and receive products. We are also pleased with the performance of our international segment, where we are implementing our expansion strategy and broadening our reach in emerging economies that are experiencing GDP growth and rising incomes. To this end, we acquired the ownership interest in our licensee operations in Greater China and Southeast Asia, which we believe provides significant growth opportunities ahead.”
Fourth Quarter Fiscal 2011 Highlights
- Net sales were $5.9 billion, a decrease of $47 million compared to the prior year. Net sales were lower due to the company’s decision to open significantly fewer TRU Express stores during the 2011 holiday selling season, along with a decline of 1.1 percent and 2.7 percent in comparable store net sales in the Domestic and International segments. These decreases were partially offset by an increase in net sales from new locations within the International segment, which included business operations in Greater China and Southeast Asia, as well as a foreign currency translation benefit of $44 million.
- Adjusted EBITDA decreased to $749 million, compared to $804 million in the prior year.
- The Learning and Core Toy categories continued to be strong, generating net sales growth of 3.4 percent and 1.9 percent. The Entertainment category (which includes electronics, video game hardware, and software) was the weakest, declining 7.3 percent. Excluding the Entertainment category, net sales were up 0.7 percent.
- Gross margin was $1,981 million, compared to $2,034 million in the prior year.
- Selling, general, and administrative (SG&A) expenses were $1,274 million, compared to $1,272 million in the prior year.
- Earnings before income taxes for the quarter were $524 million, compared to $565 million in the prior year.
- Net earnings were $343 million, an increase of $13 million compared to $330 million in the prior year. The increase in net earnings was primarily attributable to a reduction in income tax expense and interest expense.
Full Year Fiscal 2011 Highlights
- Net sales were $13.9 billion, an increase of $45 million compared to the prior year. Excluding the impact of foreign currency translation of $293 million, net sales were down due to a decline in comparable store net sales of 1.7 percent in the Domestic segment and 2.7 percent in the International segment. Partially offsetting the decrease was an increase in net sales from new locations within the International segment, which included, from the date of acquisition, business operations in Greater China and Southeast Asia.
- The Learning and Core Toy categories were the strongest categories for the year, generating net sales growth of 5 percent and 4.3 percent. The Entertainment category (which includes electronics, video game hardware and software) was the weakest, declining 9 percent. Excluding the Entertainment category, net sales were up 1.8 percent for the year.
- The company converted or relocated 61 stores to an integrated side-by-side format and opened 10 new side-by-side stores. As of January 28, 2012, the company operated 327 side-by-side stores offering both toy and juvenile products and 96 additional TRU stores, which received a minor capital reinvestment contemporizing the store and dedicating a small portion of the store to juvenile products.
- Gross margin was $4,970 million, compared to $4,925 million in the prior year. The increase was driven by a foreign currency translation benefit of $113 million. Gross margin, as a percentage of net sales, increased 0.2 percentage points to 35.7 percent.
- SG&A expenses were $4,029 million, compared to $3,942 million in the prior year. The increase in SG&A was driven by $95 million of foreign currency translation impact. Excluding the impact of foreign currency translation, SG&A decreased primarily as a result of lower litigation settlement expenses for certain legal matters and a decrease in pre-opening, payroll and rent expenses.
- Adjusted EBITDA for fiscal 2011 was $1,054 million, compared to $1,118 million in the prior year, marking the third consecutive year the company exceeded $1 billion in adjusted EBITDA.
- Interest expense was $442 million, a decrease of $79 million versus the prior year. Interest expense was lower largely due to the write-off of deferred financing charges as a result of debt refinancings in the prior year.
- Net earnings for the full year were $149 million, compared to $168 million in the prior year. Contributing factors to the change in net earnings were an increase in SG&A, a decrease in income tax benefit and an increase in depreciation and amortization, partially offset by a decrease in interest expense and an increase in gross margin.
For the full year, TRU invested $380 million primarily to convert, expand, and remodel existing stores, open new stores and upgrade its information technology systems and capabilities, compared to $325 million in the prior year.
Total debt at the end of fiscal 2011 was $5,170 million, a decrease of $118 million from the prior year.
Kohl’s to Carry Exclusive American Idol Apparel
Kohl’s Department Stores; FremantleMedia Enterprises; 19 Entertainment, a division of CKX, Inc.; LF USA, a subsidiary of Li & Fung Limited; and Bravado announced plans to launch an exclusive American Idol apparel collection. Bringing together fashion, music, and entertainment, the newly created American Idol fashion brand—Authentic Icon (AI)—will be available exclusively at Kohl’s and Kohls.com beginning April 2012.
Positioned in the junior’s and young men’s departments, the AI spring collection will be available in Kohl’s stores through June to coincide with American Idol’s 11th season.
LF USA’s MESH division will design and produce the AI collection. Kohl’s will be the exclusive retailer and support the brand with marketing such as national advertising, in-store graphics, online and digital media, direct mail, and public relations.
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Sid The Science Kid Comes to the Big Screen
The Jim Henson Company has signed an agreement with its first partner in China, Nine Eyes Stone & Shanghai Animation Film Studios, to co-produce Sid the Science Kid: The Movie, based on the company’s TV series. The all-new feature film is the company’s first animated movie available in both a 3-D format and standard HD.
The Jim Henson Company represents worldwide rights to the movie outside of China, including all theatrical, television, DVD, and digital platforms and will meet with international buyers for the feature film at the upcoming MIPTV market. As part of the financing agreement, Nine Eyes Stone & Shanghai Animation Film Studios has obtained distribution rights for both the existing series and new film in the Chinese market.
The film will be written by long-time show runner Bradley Zweig, who also serves as an executive producer. Additional executive producers are Lisa Henson and Halle Stanford of The Jim Henson Company. For Nine Eyes Stone, Al F. Barry is the executive producer and David Miller is producer. The Jim Henson Company is handling all ancillary distribution of the property including licensing, video, and merchandising.