Jakks Pacific revenue falls 11% in second quarter

The toyco reported net sales of US$105.8 million and a net loss of US$18.6 million in the wake of Toys "R" Us closures.
July 27, 2018

California-based toymaker Jakks Pacific reported net sales of US$105.8 million in Q2 2018, a decline of 11% from the same period last year. The company’s net loss for the quarter was US$18.6 million, compared to the US$16.7-million net loss reported in Q2 2017.

Jakks Pacific attributed the declines to the liquidation of Toys “R” Us in the US and multiple global markets, following a number of toymakers—including Mattel and Hasbro—reporting similar declines in Q2 sales due to TRU closures. Recent data from market research firm The NPD Group shows that, despite TRU store closures, US toy sales grew 13% year-to-date for the first 14 weeks of 2018.

Despite the sales disruption and losses attributed to the TRU bankruptcy, Jakks Pacific saw strong results for a number of its brands, including Incredibles 2, Squish-Dee-Lish and MorfBoard. In fact, the toymaker reports that geographic expansion, new warehouses and the launch of Incredibles 2 and Squish-Dee-Lish resulted in a sales increase of more than 25% in Q2 2018. Adjusted EBITDA for the second quarter, meanwhile, was US$8.49 million (compared to US$5.36 million in Q2 2017).

Additionally, Jakks reported that its C’est Moi proprietary cosmetic brand for tweens is gaining momentum due to broadening distribution. New product introductions for MorfBoard Xtensions, Real Working’ Buddies Mr. Banks, Squish-Dee-Lish, Perfectly Cute, TP Blaster, Fancy Nancy, Incredibles 2 and Mega Man are planned for fall 2018.

In January, Hong Kong Meisheng Cultural Company Limited expressed interest in buying additional shares to bring its holdings to 51% of Jakks’ shares. According to the toymaker, that expression of interest was recently reaffirmed and is being evaluated by a committee of independent directors.

Declines in Q1 and Q2 follow a challenging fiscal 2017 for Jakks Pacific, which saw global net sales decline 13%. Moving forward, Jakks expects the effects of the TRU liquidation will persist into the second half of 2018 and as a result anticipates net revenue for fiscal 2018 will decline compared to 2017.

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