Jakks Pacific’s Q3 results exceed expectations as total sales take a dip to $242.3m

Despite a sales decline of around $38 million year over year to $242.3 million, the US based toy maker JAKKS Pacific has chalked its third quarter results up to a win, having exceeded expectations for sales, gross margin, and operating income.

Excluding declines in sales of Frozen products and its Disguise Halloween costumes this year – the two largest challenges that the company faced, competing with Disney’s Frozen 2 launch year in 2019 and less interest in Halloween across retail this year – the firm’s Q3 sales rose 13 per cent year over year.

“Our third quarter results exceeded our expectations for sales, gross margin, operating income and adjusted EBITDA,” said Stephen Berman, JAKKS Pacific’s chairman and CEO.

“We faced significant challenges in the quarter, including difficult comparisons against the successful launch of Disney Frozen 2 last year and reduced retailer commitments to Halloween products. Excluding declines in Disney Frozen merchandise and Disguise Halloween costumes, our net sales rose 13 per cent compared to the third quarter of last year.”

Retail sales of the toy firm’s products continued to accelerate during the quarter as JAKKS Pacific’s top three US customers in aggregate reported an increase in year-to-date sell-through of 28 per cent through the first nine months, compared to an increase of 14 per cent through the first half.

“We expect the balance of this year to show continued progress on profitability despite difficult revenue comparisons, and to end the year poised for growth in sales and profitability in 2021. We expect to close out the year on a strong note, and carry momentum into 2021,” said Berman.

The company has stated that it will ‘remain committed to containing costs and managing its balance prudently,’ as it now expects to see continued strong performances of new launches across Disney Princess, Disney Frozen, Electronic Arts APEX LEgends, SEGA’s Sonic the Hedgehog, and Nintendo’s Super Mario.

“In addition, we’re continuing to see strong support from our internal brands and products like Kitten Catfe, Xtreme Power Dump Truck, ReDo Skateboard Co. and our re-launch of Eyeclops,” said Berman.

“Looking ahead to next year, we believe sales will be buoyed by a more robust entertainment slate by our licensing partners compared to 2020, and what we hope will be a return to more normal consumer shopping patterns and gift giving, as well as a return to more normal Halloween activities. We believe our continued emphasis on margin improvement and cash preservation will lead to improved results in 2021.”

Net sales for the third quarter 2020 were $242.3 million, down 14 per cent versus $280.1 million last year. The decline was driven by lower sales of products related to Disney’s Frozen and Frozen 2, which were strong contributors to sales in the third quarter 2019, and by sharp declines in sales of Disguise Halloween costumes, demand for which was curtailed by Covid-19.

Net sales in the Toys/Consumer Products segment were down eight per cent globally. Net sales of Disguise Halloween costumes declined 27 per cent.

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