New Toy Line Seen As “Game-Changer” for RC2

Learning Curve Brands Inc., a subsidiary of RC2 Corp., a maker of toys and infant products based in Oak Brook, Ill., announced the international launch of a new toy line based on Ludorum PLC’s television series, “Chuggington,” a children’s program about talking trains.

“We think the ‘Chuggington’ strategy has the potential to be a game-changer for RC2,” said Craig R. Kennison, senior analyst at Robert W. Baird & Co. Inc.  Paul E. Purcell, CEO of Robert W. Baird & Co., sits on RC2′s board of directors.

RC2’s stock rose 1.3 percent to close at $15.24 Thursday.

The announcement comes less than a month after RC2 agreed to pay a $1.25 million civil penalty following allegations that it violated product safety rules in 2007.  RC2 recalled 1.5 million “Thomas & Friends” train sets that year after lead was found in surface paint on the wooden trains.

RC2 revenues fell to $437 million in 2008, down from $489 million the previous year, an 11 percent drop.In 2008 RC2 posted a loss of $205 million or $11.82 per diluted share.Subsequently the company cut 15 percent of its workforce and has aggressively sought new opportunities.

Kennison expects that revenue from the “Chuggington” line will help offset “Thomas”-related losses.

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“Chuggington,” he said, “has been a very successful television program in the U.K. and other European markets for well over a year, building mindshare for the toy launch this year,” Kennison said.

Learning Curve Brands plans to introduce more than 20 die-cast engines and several show-themed playsets this spring in the U.K., Germany, France, Japan, Australia and Canada.The toy line is expected to hit U.S. stores in the spring of 2011.

The Disney Channel picked up 52 episodes of the “Chuggington” television series in June.  The show makes its U.S. debut Monday and will air on the cable network six days a week.

“With the Playhouse Disney television debut and ‘Chuggington’s’ continuing success abroad,” RC2 President Peter Henseler said in a statement, “we look for ‘Chuggington’ to be a big seller in 2010 in our international preschool play category and again in 2011.”

RC2 acquired master toy licensing rights to the “Chuggington” franchise in January 2009.   The company did not pay a customary advance under the agreement.  Instead RC2 bought a 50 percent stake in intellectual property rights to “Chuggington” and paid for 50 percent of the development costs. “Chuggington” creator Don Toht is a former Learning Curve Brands executive.

Kennison said, “Unlike other revenue sources, Chuggington characters, the intellectual property, are controlled by RC2, so as the franchise grows, the wealth creation accrues to RC2 and its joint-venture partner.”

Although RC2 will pay royalties on the toys to other companies with intellectual property rights to “Chuggington,” Kennison said RC2 stood to gain significantly from the agreement.

“Owning a franchise, like Barbie or G.I. Joe, has its rewards,“ Kennison said, adding, “RC2 is going forward with a property that it owns, which is the game-changer.”

This entry was posted on Friday, January 15th, 2010 at 4:32 pm and is filed under Chuggington, Learning Curve Brands Inc., RC2 Corp.. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.