Spin Master has cited supply chain issues at its US distribution centre as the reason behind the fourth quarter dip seen by the global toymaker in its latest financial results.
Amid reports of a loss of $17.2 million for the three months ending December 31st 2019, compared with earnings of $11.4 million a year earlier, the Canada-based outfit has warned of further supply impacts this year over the impacts of the coronavirus.
Q4 revenue actually came in at $473.5 million, up from $414.3 million in the same quarter one year prior.
Spin Master has said it is monitoring the coronavirus situation closely. Currently, around 60 per cent of the toymaker’s goods are manufactured in China. The company has said it expects that the evolving conditions “will have an impact on our global operations.”
“Our overall performance in the fourth quarter and for 2019 was disappointing. Despite the solid performance of several of our brands and franchises, we were unable to fully offset the year over year decline in Hatchimals sales. Furthermore, we did not execute at the level needed to meet our profitability targets,” said Ronnen Harary, Spin Master’s chair and co-CEO.
“Spin Master is committed to innovation and has a proven ability to develop breakthrough toys, entertainment franchises and digital toys that entertain and spark imagination for kids and families globally. Our industry is evolving and we are moving quickly to adapt to the new opportunities, leveraging the underlying strength of our core business, our dedication to innovation, our global distribution network and our financial stability.
“As we consider our prospects for 2020 and beyond, the strength, diversity and depth of our portfolio give us confidence that we will deliver long-term growth.”
Gross product sales increased 18.3 per cent to $550.7 million from $465.5 million, driven primarily by growth in the boys action and construction, activities, games and puzzles, and plush, pre-School and girls segments.
In Europe, gross product sales increased 27.2 per cent, 18.8 per cent in North America and 1.6 per cent across the rest of the world.
Bakugan and Monster Jam as well as the initial shipments of DC licensed products bolstered Spin Master’s boys action and construction segments, but were partially off-set by decreases in Boxer and Fugglers. Meanwhile, pre-school and girls was driven by the success of PAW Patrol, but partially off-set by by decreases in Party Popteenies and Twisty Petz.
“Our product pipeline management process remains strong,” said Mark Segal , Spin Master’s executive vice president and CFO. “Last year we encountered several operational challenges, as we continued to navigate an evolving retail landscape. In 2020 we have a renewed focus on operational excellence and will address these challenges in order to build a high margin, sustainable platform for long term global growth, underpinned by our strong balance sheet. We are committed to developing a broad cost management program that builds operating efficiencies into our business.”
Harary concluded: “We are committed to re-energising our top line as well as developing a broad program that builds operating efficiencies into our business.
“We have a clear strategic vision, a strong financial plan, a leadership team focused on execution and the entrepreneurial spirit and passion required for long-term success. Regarding COVID-19, we are monitoring the situation very closely and are assessing the impact to our supply chain as information becomes available.
“It is anticipated that the evolving conditions will have an impact on our global operations, as our manufacturing base in China, which produces approximately 60 per cent of our goods, is not yet able to produce at full capacity. We do not know what the rest of the year will bring but we have initiated a broad range of actions to attempt to mitigate disruptions.”