Airfix model

Poor Christmas sees fall

Shares in Hornby have fallen after the Scalextric set and Airfix model maker warned that poor Christmas sales would hurt full-year profits.

The Thanet-based company said that fewer sales of its high-end train sets during the traditional toy buying period would drag pre-tax profit expectations down from £7m to £5m for the 12 months to March 31.

The news knocked 15 per cent from Hornby shares, which fell 18½p to 105p.

In a statement to shareholders senior management said UK sales growth had been “muted” – although overall sales are ahead of the same period for last year.

“Sales of our higher ticket Hornby and Scalextric sets before Christmas were disappointing,” Frank Martin, Hornby chief executive, said saying the decline to “a lack of willingness to spend on relatively high ticket items”.

The warning ended a run of recent positive news for Hornby, which reported an 82 per cent increase in first-half profits reported in November.

Hornby, whose brands include Electrotren, Lima, Jouef and Corgi, posted the higher first-half results as a result for London Olympics-themed model trains, as well the solution to a supply problem in China.

However, the toymaker suffered a similar fate to many UK retailers over the Christmas period as consumers avoided expensive purchases – such as Hornby’s East Coast Pullman digital train set that retails for £275.

Chairman, Neil Johnson added: “The challenging economic environment impacted UK sales negatively pre- Christmas. In anticipation of continuing difficult trading conditions, we have adapted our business to offer a wider range of products at lower price points in categories complementary to our core business.

“We maintain an undiminished focus on the development of our core ranges whilst continuing to broaden our product range, appeal and geographic reach. It is however proving extraordinarily difficult to predict sales accurately in these turbulent markets.

“ The successful acquisition of a number of important global licenses reinforces our mission statement: o be the most successful model, hobby and collectable toy company in the world”.

The company has responded to poor consumer sentiment by introducing lower-quality, cheaper train sets, and last week showcased its offerings for 2012 at the London Toy Fair.

Hornby’s new products include Scalextric Star Wars toys, timed to coincide with the reissue of the movies in 3D format, collectable Corgi models costing £1.99 and pre-school items including die-cast vehicles, play sets and jigsaw puzzles based on the TV series Olly the Little White Van.

The profit warning comes in spite of the toymaker receiving a £1m boost in first-half turnover from Olympic-themed toys, which include a model railway set based on the high-speed Javelin shuttle that will run from Kings Cross station in London to the Olympic park.

Mr Martin said that the benefits from the Olympics would continue throughout 2012, contributing “a couple of million” pounds to Hornby’s earnings next year.

Jon Copestake, retail analyst at the Economist Intelligence Unit, said: “Hornby’s results reflect the changing nature of demand for toys. Although the Hornby brand is steeped in nostalgia for many adult consumers, the prevalence of console gaming has made it something of an anachronism for younger consumers.

“It is difficult to see how Hornby products can operate as more than collectible or niche items, outside the mainstream, going forward.”