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JAKKS Pacific, Inc. JAKK recently signed an agreement with Paramount Players, a division of Viacom’s Paramount Pictures Corporation, to sell film rights of popular toy brand — Creepy Crawler.
The move reflects the company’s strategy of collaborating with popular brands and movie franchisees to drive revenues amid a challenging U.S. toy industry. The agreement shows JAKKS Pacific’s efforts to drive its toys’ popularity. JAKKS Pacific is also connecting with customers through digital videos, display banners and social ads, which will improve customer experience. Digital innovation will facilitate brand building apart from helping the company to capitalize on the growing technology-based gaming market.
Why Partnerships Are the Need of the Hour
The U.S. toy industry was dealt a heavy blow when the country’s largest independent toy seller, Toys "R" Us, filed for bankruptcy last September. Since a considerable portion of the company’s revenues were derived from sales to Toys "R" Us, the company’s net revenues were affected. On a year-over-year basis, net revenues in the first and second quarter of 2018 declined a respective 1.4% and 11.5% due to the liquidation.
Thus, the company focuses on entering into a deal for greater distribution of its iconic products to drive incremental sales. Its strategy to cultivate its digital capacities through partnerships is likely to enhance its earnings potential.
Notably, JAKKS Pacific has entered into multiple licensing agreements for varied product lines since the beginning of 2017. The company has signed licensing agreements with popular movie and television franchises like Time Warner’s Cartoon Network, Warner Bros., Sony Pictures and Universal Pictures. We expect such collaborations to boost sales as merchandise based on movies is much in demand.
Moreover, the company has collaborations with Disney, Skechers, Nickelodeon, Cabbage Patch Kids and Chico to manufacture toys and merchandise related to these brands. In fact, the toys based on popular television shows and movies, large-scale figures based on action entertainment and pre-school toys are well-liked by kids and are expected to be major top-line drivers for the company.
Meanwhile, shares of the company have risen 6%, underperforming the industry’s rally of 12.4% in the past six months.
Zacks Rank & Stocks to Consider
JAKKS Pacific carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Consumer-Discretionary sector are DISH Network Corporation DISH and Liberty Global plc LBTYA, carrying a Zacks Rank #1 (Strong Buy), and Caleres, Inc. CAL with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
DISH Network has an expected current year earnings growth rate of 9.06%.
Liberty Global has an expected current-year earnings growth rate of 103.49%.
Caleres has an expected current-year earnings growth rate of 15.7%.
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