The company has cited higher costs for litigation, product testing and commoditiesas the reasons for the drop in profit.
Jakks' net income fell to $4.2 million, or 15 cents a share, in the second quarter from $5 million, or 17 cents per share, a year earlier. While analysts on average expected 22 cents a share, according to Reuters Estimates.
Jakks has cited higher costs for product testing following the avalanche of recalls last year, as one of the reasons for the decline. The rising cost of doing business in China and higher prices for raw materials and transportation have also affected the company.
Sales at Jakks, whose brands include Funnoodle and Flying Colors, rose to $145.3 million from $129.5 million a year earlier.
The company has cut its 2008 earnings forecast to $2.80 a share from $2.91, saying it faced higher costs for raw materials, transportation, product testing and litigation. However, the firm has maintained its sales forecast of at least $891.4 million for the full year.
Analysts were expecting 2008 earnings of $2.84 a share on sales of $904.5 million. Jakks said it was optimistic about several new products. President and chief operating officer, Stephen Berman added: "We have excellent placement for what we expect will be our top drivers based on top licensed and non-licensed brands, including our new EyeClops Night Vision Goggles and new Disney Hannah Montana products."
Berman concluded: "We are also optimistic about the potential for several new lines that began to ship in the second quarter and will be hitting retail stores shortly, including our new Ulti-Motion gaming system that combines Plug It In & Play and role play accessories with the hugely popular category of wireless motion games, toys based on Neopets.com, NASCAR, Nickelodeon SLIME! and others we expect will contribute to another record year for JAKKS Pacific."