Toy Industry earnings season continues with JAKKS Pacific as the latest publicly traded company to report in.
Despite a significant 11% decrease in net sales to $711.6 million versus $796.2 million in 2022, the company achieved a notable 6% increase in gross profit to $223.4 million, its highest since 2015. Gross margin hit 31.4% versus 26.5% in 2022. Operating income dipped by 3% to $59.1 million, while net income attributable to common stockholders fell to $36.9 million from $90.0 million in 2022. However, adjusted net income attributable to common stockholders rose to $48.9 million and adjusted EBITDA stood at $75.7 million, down 1% from 2022.
In the fourth quarter, consumer behavior hinted at a return to pre-pandemic, last-minute shopping activity, leading to a 3% dip in net sales to $127.4 million, down from $131.9 million during Q4 in 2022. Sales from Disguise, JAKKS’ costume division, fell off a cliff, down 40% compared to 2022 with a 54% decline in North America.
For the full year, toys and consumer products sales were down 10% year-over-year while costumes slid 12%. JAKKS notes that despite the dip, costumes sales in 2023 were still 22% higher than in 2021 and JAKKS leadership is happy with the results.
For the third consecutive year we have met or exceeded our key financial full-year targets. The year began with the challenge of revenue comparisons with a 2022 hit-driven blockbuster product line, but we also saw opportunities for gross margin improvements with a normalized supply chain. Gross and operating margins improved year-over-year despite a more than $80 million decline in net sales, generating over $66 million in operating cash flow for the year.”
Stephen Berman, CEO, JAKKS Pacific
The Disney Dip
On a call with analysts, Berman delved into the challenges in Q4, starting with the company’s product line tied to Disney’s Wish, a film that JAKKS executives previously looked forward to as a revenue booster.
“As the press has noted, the Thanksgiving 2023 film release we supported underperformed from a box-office perspective and similarly was a challenge at retail,” Berman stated, stopping short of calling Wish out by name. “We still think it’s a great product line, and we are looking forward to a streaming launch in a few weeks to introduce the film to a broader audience. But realistically, it’s unlikely to provide a lot of chase opportunities for us in 2024.”
As recently as this week, The Toy Book spotted Wish products in the value channel, notably with dolls showing up in post-holiday shipments to Ross Dress for Less.
Despite a 9& dip in Q4, JAKKS’ Action Play and Collectibles business was up 27% in 2023, led by toys tied to the Super Mario Bros. Movie and Sonic Prime alongside core Nintendo and Sonic ranges.
The Simpsons, Moana 2, Sonic 3, and Other Big Licenses Power Future Sales
Looking ahead, Berman noted a great response from buyers at the Spielwarenmesse international toy fair in Nuremberg, Germany last month, and enthusiasm for upcoming entertainment releases, including Sonic the Hedgehog 3 from Paramount Pictures and SEGA, and Disney’s Moana 2.
Berman says that JAKKS will benefit from two Disney global marketing campaigns this year: Spark of Joy, celebrating the joy of Disney brands and storytelling; and Create Your World, a three-year Disney Princess brand campaign featuring JAKKS’ Disney Princess products. Additionally, JAKKS has been showing its forthcoming range of toys inspired by The Simpsons to retailers.
“The hours watched on this property are just incredible. We can’t wait for fans to see our range, specifically, the figures and dioramas featuring caricatures and locations from the show,” Berman said, noting that it’s been more than 15 years since a mass-marked Simpsons-inspired toy range has been in the market.
Through its recently inked deal with Authentic Brands Group, JAKKS is also rolling out new products including skateboards, roller skates, and more featuring big brands including Element, Quicksilver, Roxy, Juicy Couture, Sports Illustrated, and Prince. In 2025, JAKKS plans to launch a full range of outdoor products featuring those brands, including chairs, umbrellas, canopies, beach accessories, inflatable pool floats, sand and splash mats, foldable wagons, and more. The brand extension will help JAKKS gain shelf space across the sporting goods and specialty retail channels.
Finally, Berman notes that JAKKS has products tied to Sony’s Ghostbusters: Frozen Empire, Illumination Entertainment’s Despicable Me, Universal’s Wicked, and DreamWorks’ Kung Fu Panda 4. Those products, along with others from JAKKS’ stable of evergreen licenses should move the needle later this year.
Trending Products
