Hornby sales running out of steam

The model railway and Scalextric maker issues its third profit warning this year after poor sales of its London 2012 merchandise.

by Elizabeth Anderson
Last Updated: 06 Nov 2012
Toymaker Hornby, owner of the iconic Scalextric, Airfix and Corgi brands has lost out in recent years to iPads and computer games. The 105-year-old company, which traces its roots back to 1907 when founder Frank Hornby established Meccano, hoped that offerings such as Moshi Monster toys and London 2012 would appeal to a younger audience and mark a turnaround in the company's fortunes.

But it wasn't to be. Hornby today revealed that sales of its Olympic merchandise were disappointing and the company will not make a profit this year. Its London 2012 themed toy train sets, fleet of London taxis and a chrome finish model of the Olympic Velodrome failed to tempt consumers, and Hornby blamed the weak economic environment for shoppers reining in spending.

The company will now not meet full year expectations and it expects to only break even in the current financial year, Hornby warned today. That already comes on profits being on a downward slope. Profit fell from £4.5m last year to £3.4m in the year to the end of March 2012.

Hornby was initially optimistic about its London 2012 merchandise, saying it hoped the Games would provide a 'spike in sales'. But rival memorabilia and lower than expected demand from shoppers meant the major retailers resorted to deep price discounting to shift stock. 'The consequence of this for Hornby was that retailers lost confidence in many categories of London 2012 merchandise, and repeat orders for our products were cancelled,' Hornby said. Business was also affected by major disruptions with one of its largest suppliers in China.

Hornby shares were down 35% down to 57p after the gloomy update. Four years ago shares were trading at around 164p. Is it too late for the iconic toymaker to turn its fortunes around?

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