Movie tie-ins responsible for strong results in 2018 continue to hamper growth for Jakks Pacific during the first six months of this year.
Lower interest in licensed lines like Incredibles 2, one of the company’s standout earners of 2018, led to a 10 per cent slump in sales during the most recent quarter. Net sales in the three months to 30 June totalled $95.2 million compared with the $105.8m it made during the same period last year.
Net losses grew 20 per cent to $22.5m, while gross profits also took a hit, declining by more than a third to at $17.7 million.
Despite a shaky start to the year, Jakks CEO Stephen berman says the “expected” result will be offset in the back half of the year.
“As we have noted before, our sales this year have been shifted to the second half as a result of the timing of several films and television shows, notably Frozen 2, as well as Toy Story 4, the 30th Anniversary of the release of Disney’s The Little Mermaid, and Disney Jr.’s Gigantosaurus animated TV series,” he says.
And the second quarter wasn’t a total loss. The company’s Halloween dress-up brand Disguise made headway and saw strong growth, though this was more than offset by declines felt elsewhere in the business.
The chief executive also says he believes American toy companies have now put the Toys R Us liquidation saga behind them, that the fallout and resulting hole in toy retail “no longer weigh down the industry”.
“We remain confident that our second half sales will show renewed strength,” he adds.
Coinciding with its Q2 financial reporting, Jakks Pacific also confirmed the completion of a recapitalisation with an alliance of investors, including Wells Fargo, Oasis Investments and an ad hoc group of holders, to extend its outstanding debt obligations by three years.
It has not yet finalised a proposed sale of additional stocks to Meisheng, which would give Chinese firm a 51 per cent stake in Jakks, due to a number of issues, including securing approval from authorities in China.