California-based toy manufacturer Jakks Pacific reported net sales of US$119.6 million in its second quarter of 2017, down from US$141 million during the same period a year ago, while earnings clocked in at negative US$5.4 million (down US$9.4 million from profits of US$4 million in Q2 2016).
According to CEO Stephen Berman, the sales decline is attributed to underperforming film-related licensed properties, as well as the suspension of sales to one of its retail customers. The toymaker’s reported net loss was US$16.7 million, which included a non-cash charge of US$2.3 million related to the write-down of accounts receivable from 2014/2015 sales to an online retailer no longer in business. In comparison, Jakks Pacific’s net loss in Q2 2016 was US$4.4 million.
Operating loss for the second quarter was US$14.1 million (up from US$1.1 million in Q2 2016). Gross margin, meanwhile, was 28.2% in Q2, down from 31.8% last year as a result of deleveraging of fixed costs, shifts in product mix and closeout sales in certain categories.
Jakks also reported losses in Q1 2017, with sales down US$1.3 million to US$94.5 million. The reports follow a 2016 shaped by new category investments and the launch of Studio JP, an animation initiative to produce content based on the toymaker’s proprietary IPs. When the Q1 results were reported, Berman said the sales performance was in line with expectations and consistent with the seasonality of the industry.
Now, Jakks reports that its sales declines in the second half of the Q2 2017 were more modest as the company heads into its peak selling season, and it expects full-year adjusted EBITDA and EPS to exceed last year’s performance despite an overall decline in sales for this full year.
Anticipated results moving forward are based on several new product lines including Moana (pictured), Disney Princess and Nintendo products, which show strong year-over-year performance. Additionally, a number of new product introductions are expected this fall, including properties from licensing partners (DC Superhero Girls, Nintendo Splatoon, Disney) and from proprietary product lines (Squish-Dee-lish, Pull My Finger, Real Workin’ Buddies Mr. Dusty).
Jakks will also introduce new categories with C’est Moi, its proprietary cosmetic brand for tweens (set to launch late this year) and sporting goods line Morf (expected to launch in spring 2018).