Hatchimals, once the driver behind significant growth for Spin Master, contributed to a difficult first quarter for the Canadian toy and entertainment company.
Spin Master’s revenue fell 16.3% to US$239 million in Q1 2019. The company’s remote control and interactive characters segment dropped 65.9% to US$31.1 million, due to declines in its Hatchimals and Luvabella brands. Hatchimals also saw declines in fiscal 2018, in stark contrast with its popularity in fiscal 2017 when the brand drove significant growth for Spin Master (revenue increased 34% during that period).
Declines in PAW Patrol contributed to the preschool and girls segment dipping 23.3% to US$63.3 million, while Spin Master’s outdoor segment also fell 15.9% to US$33.6 million.
The other revenue segment dipped 3.1% to US$28.9 million, due to lower royalty income from products marketed by third parties using Spin Master’s owned IP. The drop was offset in part by increased television distribution revenue.
Spin Master’s boys action and high-tech construction segment did see significant growth during the first quarter, however, increasing 195.5% to US$49.4 million due to the How to Train Your Dragon and Monster Jam brands, as well as the relaunch of Bakugan. The activities, games, puzzles and plush segment saw its sales increase 9.4% to US$63.1 million thanks to Gund plush products and Spin Master’s Kinetic Sand and Cool Maker brands.
Gross profit fell 27.6% to US$107.7 million in Q1 2019. Gross product sales, meanwhile, dropped 16.5% to US$240.5 million in the first quarter. Gross product sales were down 23.4% in North America and down 3.2% in Europe.
According to Spin Master, the shuttering of Toys “R” Us and the shift in timing for Easter (taking place in Q2 2019) contributed to the drop. Looking forward, however, the company expects its gross product sales will increase in the low single-digit range in fiscal 2019.