Mad Catz Sales Drop on Tough Wii Comparison

Accessories manufacturer Mad Catz has revealed its second quarter fiscal results for the period ended September 30. The company saw net sales of $21.6 million (down 16.1%) with sales in North America (its largest market) seeing a decline of 18%. Mad Catz explained that there was a 55.3% rise in Canadian sales, but this was offset by a 19.6% decline in U.S. sales. Net sales in Europe were down 14.6% as well. Gross profit at Mad Catz dipped 12.5% to $6.8 million, but the gross profit margin was up slightly from 30% to 31.3%.

Last year, Mad Catz benefited from Wii Fit related accessories and other Wii items. With much more Wii weakness in general and a lack of new peripherals, Mad Catz saw its bottom line take a hit for the second quarter. Wii represented just 10.6% of total gross sales vs. 18% in the prior year quarter. The overall slowdown in the economy and games industry didn't help matters either.

Darren Richardson, President and Chief Executive Officer of Mad Catz, commented, “Fiscal second quarter net sales levels principally reflect three key dynamics. First, the beginning of the ramp in holiday ordering by our customers, which we typically experience at the end of September, was delayed this year until late October. Second, against the backdrop of overall industry sluggishness leading up to the hardware price cuts late in the quarter, we had a particularly challenging year-over-year comparison relating to our products for Nintendo’s Wii, with no significant new product placements in the fiscal second quarter of 2010 compared to strong sales of Wii Fit and power accessories in the same period last year. Third, our sales in Europe were again significantly impacted by foreign exchange fluctuations relative to the second quarter of fiscal 2009."

Richardson remains quite optimistic about his company and the games business as a whole: “While the consumer spending environment remains challenging, we believe there are several factors which will contribute to videogame industry sales this holiday season, including the attractive entertainment value proposition of PC and videogames, the recently-lowered videogame console prices and a strong pipeline of key title launches. We continue to believe our current product portfolio, featuring a diversified mix of licensed properties and platforms, combined with our successful expense management programs have positioned Mad Catz to achieve year-over-year EBITDA and earnings growth this fiscal year.”

He also believes Mad Catz should receive a nice lift from the Modern Warfare 2 launch. “While it is difficult to gauge the pace of an economic recovery, we continue to make progress in managing factors within our control and remain optimistic about the fiscal 2010 third quarter and the upcoming holiday shopping season which, for us, kicked off with the in-store launch of our range of accessories for the launch of Call of Duty: Modern Warfare 2 developed by Activision’s Infinity Ward studio. With this highly-anticipated title arriving in stores ahead of the holidays, Mad Catz is aligned with the success of what we expect to be one of the most successful games of the year," said Richardson. "Our product line-up for and association with this premier title exemplifies our efforts to be at the forefront of where the action is in the gaming industry, all with the goal of growing our earnings, cash flow and shareholder value.”