4Kids' Quarterly & Annual Losses Mount, Shares Drop 30%
posted on by Mikhail Koulikov
4Kids Entertainment, the television licensing and broadcasting company whose current anime properties include Yu-Gi-Oh!, Dinosaur King, and Sonic X, has announced on Monday that it posted net losses of US$19.6 million in the last three months of 2008, compared to US$16.8 million in the same period the previous year. The loss came as net revenues also dropped to US$14.3 million, and contributed to a sharp increase in 4Kids' total losses for the year as a whole. Its losses in 2007 were US$23.3 million, but have increased to $36.8 million in 2008.
Alfred R. Kahn, 4Kids' chairman and chief executive officer, called these numbers "extremely disappointing" and blamed the mounting losses on "the sharp economic downturn and associated severe deterioration of consumer confidence starting in September 2008," as well as "declining licensing revenue." He specifically noted that 4Kids over-estimated the potential success of their newly-launched Chaotic collectible card game. In the 4th quarter of 2008, sales of Chaotic cards amounted to only US$500,000, well below expectations. This stands in sharp contrast to Kahn's November statement, when he expressed hopes that the company would be profitable by the end of the year based on increasing sales and licensing revenues.
As it moves into the new year, 4Kids plans to continue to bolster the Chaotic franchise, both in the U.S. and in Europe. At the same time, the company plans to reduce operating costs by as much as US$25 million. To this end, it has already laid off about 15% of its staff and ended its contract with the Fox television network for a Saturday morning programming block.
The stock market response to 4Kids' announcement was a sharp drop in the prices of its shares. At one point in the day, they were trading at US$1.01 — a 10-year low — and by close of trading, were at $1.07. It is down 27.7% from the previous day's price. Earlier in the year, they stood as high as US$25.30.