Toys might be dangerous
Toymakers recall 10 million toys and other items due to potential serious injuries.
Article originally in Reuters
The shares of Fisher-Price, a unit of the toymaker Mattel Inc, fell on the announcement that the products, including Little People Wheelies Stand 'n Play Rampway; Fisher-Price tricycle models; Healthy Care, Easy Clean and Close to Me high chairs; and various infant toys with inflatable balls, were recalled after some injuries, including lacerations and choking hazards, were reported.
The shares recovered the premarket losses briefly, but at mid-day were down about 1.7%, or 42 cents, at $23.13 on the Nasdaq.
"This raises a concern because of the number of toys being recalled," Wedbush Morgan Analyst Ed Woo said, noting that investors remember well Mattel's large-scale 2007 recall of toys contaminated with lead.
Regulations on toy manufacturing became more stringent after that episode, leading Woo to believe that this latest recall will probably not spread to other products as did the last one.
All toy manufacturers have faced recalls, he said, but Mattel's and RC2 Corp's were the biggest. RC2 recalled Thomas & Friends brand wooden vehicles and set components when it was discovered that the paint used contained lead.
RC2's shares were up 1.7% at $20.69 on Thursday after an upgrade to "outperform" from BMO Capital Markets.
Johnson & Johnson has mounted a massive recall of faulty medicines this year, including 135 million bottles of 40 children's and infant products such as Children's Tylenol and Benadryl.
"Another 10 million recalled toys demonstrates the growing epidemic of hazardous products lurking in people's homes across America," said Dan Verakis, founder and CEO of SafetyBook.org, which provides a recall-monitoring service to consumers.
"Over 55 million products have now been recalled this year, including about 42 million that are a direct threat to children," he said.
Mattel's latest toy recalls, to be recorded in the third quarter, will have minimal financial impact, Woo noted. They were expected to affect full-year earnings by about a penny a share.
The items were sold at mass merchandise retailers in the United States and Canada from September 2001 through September 2010.
Sterne Agee analyst Margaret Whitfield said the share dip was a buying opportunity. "Mattel is going to have a very strong holiday season," she said.
The list of products involved, model numbers and where they were sold can be found at Mattel's website.
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