Topps released its financial statement for the first quarter of fiscal 2004, which ended on May 31, revealing that net income had decreased 50% by some $3.5 million versus last year. Sales of Topps confectionary product actually increased some 5.8% to $45.5 million, but it wasn't enough to offset a 31.7% decline in the entertainment sector, which includes sports cards and fell from $44.6 million a year ago to $30.5 million. Due to weakness in the sector Topps has reduced the number of its sports card releases. The decline of the U.S. sports card market was the primary culprit in the company's lower sales, but lack of World Cup-related sales also hurt Topps' international sector. The only successes in the entertainment category noted in the report were increased sales of English Premier League stickers, the successful launch of a new format for Italian football (soccer) product, and the performance of Hamtaro licensed products in Italy, and Yu-Gi-Oh! products in Ireland and Germany. Topps also admitted that it would not meet its goal of break-even profitability on its etopps website, though the company did sign an agreement to continue working with ebay on the project for two more years.
Topps' financial statement also revealed that the company was paying $29.5 million in cash for WizKids; the closing is expected to occur by July 15 of 2003. Topps' financial position remains strong and the company is still in active pursuit of acquisition candidates within the confectionary segment. Topps reported $113.9 million in cash and no debt as of May 31, 2003. According to its financials Topps 'currently anticipates that WizKids will be modestly accretive to Company's earnings in fiscal 2004.'
The acquisition of the privately held WizKids, LLC (see 'Topps Acquires WizKids') certainly makes sense as an effort to shore up Topps' entertainment sector. The fact that sports card rivals Upper Deck (Yu-Gi-Oh!) and Score (DBZ CCG) are already well established in the growing collectible games market certainly made the rationale for acquiring WizKids even more compelling.