JAKKS Pacific's Loss Wider than Expected - Analyst Blog
29 Abril 2013 - 6:00AM
Zacks
Toy maker JAKKS Pacific Inc.'s (JAKK)
adjusted loss of $1.23 per share in the first quarter of 2013 was
substantially wider than the Zacks Consensus Estimate of a loss of
84 cents per share and the year-ago adjusted loss of 59 cents per
share. Loss per share was also wider than the company's expected
range of 83—85 cents loss per share. The unexpected delay of a tax
benefit of 24 cents per share as well as margin contraction hurt
the company’s results.
On a reported basis, including legal and financial advisory fees
and expenses, JAKKS Pacific suffered a loss of $1.26 per share
versus a loss of 62 cents per share in the year-ago quarter.
JAKKS Pacific’s revenues grew 6.4% year over year to $78.1
million in the first quarter, beating the Zacks Consensus Estimate
of $70.0 million. Net sales surpassed the company’s guided range of
$70 to $73 million.
Strong sales of core product lines helped drive revenues.
JAKKS-owned Fly Wheels, Disney Princess dolls and dress-up,
Fisher-Price ride-ons, outdoor and indoor preschool furniture, and
outdoor activity items from the Maui division were the major
contributor to sales. Management stated that the first quarter
represents 10% of its guided sales for 2013.
Gross margin in the quarter was 29.9%, down 220 basis points
(bps) year over year. The downside in margin was the result of
higher customer allowances and close-out sales.
Guidance
Management reiterated its guidance for 2013. The company expects
earnings per share to be in the range of 63—68 cents per share. Net
sales are expected to increase 4.0% to 5.0% in the range of about
$694—$700 million.
JAKKS foresees a better business environment for itself in the
rest of 2013 and remains upbeat regarding the opportunities in
China. Aggressive retail promotion plans for the core line as
well as the launch of its DreamPlay product line this fall are
expected to trigger sales in the second half of the year.
Our Take
We are not quite optimistic about the stock at the current
level. The company reported a wider-than-expected loss in the first
quarter, despite its revenues growing year over year and beating
the estimate. JAKKS Pacific has been faltering for the last
four quarters with its bottom line missing the estimate in each and
every quarter. The company had to bear the brunt of higher
costs.
JAKKS Pacific has become a victim of the change in children’s
play pattern in recent years and hence needs novelty in its product
launches to cope with the change. Several of its key products lack
demand. Although the company is striving hard for some breakthrough
launches, we are yet to see any improvement.
JAKKS Pacific currently carries a Zacks Rank #5 (Strong Sell).
Two of the major toy companies Mattel Inc. (MAT)
and Hasbro Inc. (HAS) beat estimates on both
counts in first quarter 2013. Another toy company, LeapFrog
Enterprises Inc. (LF) is slated to report its earnings on
May 2.
HASBRO INC (HAS): Free Stock Analysis Report
JAKKS PACIFIC (JAKK): Free Stock Analysis Report
LEAPFROG ENTRPS (LF): Free Stock Analysis Report
MATTEL INC (MAT): Free Stock Analysis Report
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