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Jakks Pacific slashes outlook as key toys fail
July 17, 2013 / 10:58 PM / 4 years ago

Jakks Pacific slashes outlook as key toys fail

(Reuters) - Toy company Jakks Pacific Inc (JAKK.O) slashed its full-year forecast and said it would substantially cut jobs, citing disappointing sales from two new licensed brands and a shift in children’s playing preference to electronic devices.

Jakks’ shares fell as much as 28 percent after hours, as the company suspended its quarterly dividend and announced a restructuring plan involving a “substantial reduction of leased space, employees and other overhead expenses”.

The company said several retailers in the United States and Europe had cut orders and that several of its key products, including the Monsuno and Winx Club brands, performed poorly.

In 2012, Jakks launched the Monsuno line of action figures, playsets and accessories, based on the Japanese-style animated television show of the same name, in part to make up for the loss of its Pokemon license.

Its Winx Club dolls, also launched last year, are based on an Italian animated series.

“They put all their trust in that Monsuno was going to be good or Winx was going to be good,” Needham & Co’s Sean McGowan said.

“They made big guarantees to get those licenses, but they have underperformed.”

The company did not break out sales for either brand.

Jakks, which also sells toys under such licenses as Cabbage Patch Kids and Hello Kitty, posted a surprise second-quarter loss of $2.14 per share, as sales fell 27 percent to $106.2 million.

Chief Executive Stephen Berman said results were also hurt by the shift in play patterns of children of all ages to smart devices.

The world’s largest toymaker, Mattel Inc (MAT.O), posted a much weaker-than-expected profit earlier on Wednesday, hurt by declining sales of its iconic Barbie doll.

    Jakks now expects to post a loss of about $56.1 million, or $2.56 per share, for the full year. It had earlier forecast earnings of 63-68 cents per share.

    However, Needham’s McGowan said he doesn’t expect the company to make even its revised forecast, saying it does not have any other licenses to help boost results in the second half of the year.

    Jakks said it expects to return to profitability in 2014.

    Full-year sales are expected to come in at around $620 million, down from the $694 million to 700 million the company had forecast in February..

    Shares of the company, which have declined 27 percent over the last 12 months, were trading down 22 percent after the bell. They closed at $11.48 on the Nasdaq on Wednesday.

    (This story is refiled to fix typo in paragraph six)

    Reporting by Arpita Mukherjee and Chris Peters in Bangalore; Editing by Anthony Kurian

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