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JAKKS Pacific (JAKK) Q3 Earnings and Sales Miss Estimates

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JAKKS Pacific (JAKK) Q3 Earnings and Sales Miss Estimates

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

JAKKS Pacific, Inc. JAKK performed disappointingly in the third quarter of 2018, wherein both top and bottom line fell short of the Zacks Consensus Estimate for the second straight quarter. Adjusted earnings came in at 38 cents per share, missing the consensus mark of 49 cents. The company had incurred loss of 77 cents per share in the prior-year quarter.

Net sales totaled $236.7 million, which lagged the consensus mark of $256 million by 7.5%. The top line also fell 9.8% on a year-over-year basis. Notably, the challenging industry scenario for traditional toymakers has hurt JAKKS Pacific’s third-quarter results. Furthermore, the company stated that the Toys ‘R’ Us bankruptcy was another reason behind its disappointing performance in the quarter under review. Per JAKKS Pacific, the positive contribution of products like Incredibles 2, Fancy Nancy, Perfectly Cute, Squish-Dee-Lish and MorfBoard was overshadowed by the Toys ‘R’ Us bankruptcy.

In a year’s time, shares of JAKKS Pacific have lost 18.3% compared with the industry’s 3.4% decline.

Operating Highlights

In the reported quarter, gross margin was 27.2%, up 370 basis points (bps) from the prior-year quarter. The upside can be attributed to non-recurring items recorded in third-quarter   2017 due to minimum guarantee shortfalls as well as inventory charges.

Adjusted EBITDA was $27 million compared with $38.6 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 Sep 30, 2018, cash and cash equivalents amounted to $57.1 million compared with $48.8 million as of Sep 30, 2018. Inventory increased to $64.5 million from $58.4 million at the end of Dec 31, 2017. Long-term debt, as on Sep 30, 2018, totaled $145.1 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, carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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