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JAKKS Pacific (JAKK) Q2 Earnings Miss Estimates, Margin Falls

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JAKKS Pacific (JAKK) Q2 Earnings Miss Estimates, Margin Falls

JAKKS Pacific's (JAKK) discouraging performance in the second quarter can be attributed to the liquidation of Toys 'R' Us.

JAKKS Pacific, Inc.’s JAKK reported dismal results in second-quarter 2018, wherein both the top and the bottom lines missed the Zacks Consensus Estimate. The company incurred adjusted loss of 72 cents per share, wider than the consensus mark of loss of 50 cents. In the year-ago quarter, the company had incurred a loss of 63 cents per share.

Net sales totaled $105.8 million, which lagged the consensus mark of $115 million by 8%. The top line also fell 11.5% on a year-over-year basis. Notably, the challenging industry scenario for traditional toymakers has affected JAKKS Pacific’s second-quarter results. Furthermore, the company stated that the Toys ‘R’ Us bankruptcy was another reason behind its disappointing performance in the quarter. Per JAKKS Pacific, the positive contribution of products like Incredibles 2, Squish-Dee-Lish, and MorfBoard was overshadowed by the Toys ‘R’ Us bankruptcy.

In the past six months, shares of JAKKS Pacific have lost 9.4% against the industry’s 13.1% rise.

Operating Highlights

In the quarter under review, gross margin was 26.4%, down 180 basis points (bps) from the prior-year quarter. The metric was negatively impacted by rise in sales reserves and lower selling prices for certain licensed products at the end of the cycle.

Adjusted EBITDA was negative $8.5 million compared with negative $5.4 million in the prior-year quarter.

JAKKS Pacific, Inc. Price, Consensus and EPS Surprise

JAKKS Pacific, Inc. Price, Consensus and EPS Surprise | JAKKS Pacific, Inc. Quote

Balance Sheet

As of Jun 30, 2018, cash and cash equivalents were $63 million compared with $46.8 million as of Mar 31, 2018. Inventory increased to $62.2 million from $58.4 million at the end of Dec 31, 2017. Long-term debt as on Jun 30, 2018, totaled $137.3 million, up from $133.5 million at the end of 2017.

JAKKS Pacific, which shares space with Glu Mobile Inc. GLUU, Hasbro Inc. HAS and Activision Blizzard, Inc. ATVI, currently carries a Zacks Rank #2 (Buy). However, this bullish rank is subject to change following the earnings announcement. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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