The effects of a sluggish US toy industry have caught up with LA-based toyco Jakks Pacific, which saw declines across all of its divisions this Q2, after having its best second quarter of all time in 2022.
Jakks generated US$166.9 million in global net sales this quarter, representing a sharp 24.3% decline compared to the historic US$220.4 million it sold last year. Despite this negative result, the company reports that net sales for the whole first half of 2023 are still its second-highest in 15 years at US$274.4 million.
“I’m pleased to say that the first half of the year has met, and in many cases exceeded, our expectations,” said CEO Stephen Berman in yesterday’s Q2 report. “Retail sell-through accelerated in the quarter from earlier in the year, as [retailers] continued to work down inventory levels and refocus their attention and planning for the annual holiday shopping season.”
Sector by sector, Jakks’ toys and consumer products sales were down 20.8% to US$117.9 million, while costume division Disguise sustained a 31.5% hit and closed at US$49 million. Berman anticipates a very strong year in costumes, and attributes the early decline to retailers ordering products more conservatively and later in the cycle than in Q2 2022, when the company experienced an all-time costume sales peak of US$72 million.
The hands-down hero of Jakks’ second quarter was action figures, as it was the only segment of the company’s toys and consumer products business to post growth. This was thanks to strong sales of licensed Super Mario Bros. (pictured) and Sonic the Hedgehog toys. Action figure sales were up 41% compared to last year’s Q2, and Berman said the toyco has been steadily rebuilding this part of its business over the past three years.
Jakks also eliminated US$30.2 million in debt in June to better position the company for growth and free up cashflow, according to Berman. Its debts last year totalled US$84.9 million, a healthy decrease from US$177.7 million in 2019.