The same licensed properties that drove sales in Q1 2018 for Jakks Pacific—including The Incredibles 2, Moana and Tsum Tsum (pictured)—contributed to a 23.8% sales decline in Q1 2019 to US$70.8 million. Gross profits at the California-based toymaker also fell, by 37.5% to US$14.3 million.
This downturn in sales follows speculation that declining US box-office receipts are causing film-focused consumer products to underperform. As a result, BMO Capital Markets reduced its growth estimate for the US toy industry last year to 1.5% (down from 2% in 2017). In its findings, BMO Capital Markets warned that with movie fatigue setting in, toyetic kids franchises are cannibalizing each other’s toy sales.
Despite these concerns, Jakks anticipates new products connected to upcoming film releases will shift revenue to the second half of 2019. In a statement, the toymaker said it expects sales will benefit from products related to Frozen 2 (November 22) and Toy Story 4 (June 21), as well as the 30th anniversary of The Little Mermaid.
The Q1 downturn follows a difficult fiscal 2018 for the company that saw sales drop 7% to US$567.8 million. In Q3 2018, Jakks initiated a plan to reduce its global workforce and consolidate operations following a 10% decline in net sales.
Moving forward, the toyco is aiming for a 5% sales lift by fiscal 2019. Meanwhile, negotiations continue with Hong Kong Meisheng Cultural Company, which expressed interest in January 2018 in buying additional Jakks shares to control 51% of the company’s total shares.