Spin Master hatches shaky Q3

Steep declines in Hatchimals and circling US tariffs hit the company’s third quarter hard, though Europe rallies and company says full-year will be bright

Written by Rhys Thomas

Posted 06.11.2019 | Business

Spin Master hatches shaky Q3 thumbnail

Hatchimals delivered an unwelcome surprise during Spin Master’s Q3, contributing to a double-digit decline in sales and revenue.

Gross product sales fell 11.4 per cent to $583m, and the Canadian toy maker’s top line was hit by 11.6 per cent, down to $548m for the quarter compared with $658m in the same period of 2018

Spin Master’s remote control and interactive characters category, once the jewel in its crown, dropped an eyewatering 50.7 per cent to $117m. It was impacted by a dramatic loss of sales from the Hatchimals brand, its interactive doll Luvabella, and main RC brands, Zoomer and Air Hogs.

Europe was the only stronghold for Spin Master, which saw gross product sales growth of 1.6 per cent for the quarter. In North America, sales slumped by 15.3 per cent, and elsewhere in the world, sales declined 12.1 per cent.

The company blamed US tariffs, which have overshadowed toy companies’ ability to do business throughout the year, and congestion in its US supply chain. Retailers have been switching orders and changing imports throughout the quarter to mitigate the impact of import levies. But Spin Master says the drop is not indicative of it full-year results and is confident to be back on track in Q4.

Spin Master President and COO Ben Gadbois says: ““Our decision to manage our brands more tightly using domestic replenishment and an evolving retailer trend away from direct import orders towards domestic orders shifted shipments from the third quarter to the fourth quarter.

“In addition, increased inventory levels arising from our decision to bring in inventory earlier to mitigate US tariffs, together with short term disruption caused by our US East Coast warehouse consolidation, created congestion in our US supply chain.

“This resulted in a significant shift of both shipments and orders from the third quarter to the fourth quarter. We are pleased with the progress we have made in October, with both orders and shipments off to a strong start.

“We remain on track to deliver top line growth for the full year.”

Ronnen Harary, Spin Master’s chairman and co-CEO, added that the company's strength in franchise building “will continue to drive long term profitable growth”, as the company joins the likes of Hasbro and Mattel in an evolution beyond toy maker to entertainment and play company.

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