Malibu, Calif.-based toy maker
JAKKS Pacific Inc.
) earnings of $1.11 per share in the third quarter of 2013 beat
the Zacks Consensus Estimate of $1.06 per share by 4.7% and the
year-ago quarter earnings of $1.10 by 0.9%. A
better-than-expected top line performance and operating margin
expansion pulled up earnings in the quarter.
JAKKS Pacific's revenues decreased nearly 1.2% year over year
to $310.9 million in the third quarter, but beat the Zacks
Consensus Estimate of $298.0 million by 4.3%. Higher sales from
Role-playing, Novelty and Seasonal Toy segment may have
contributed to the beat.
Of late, traditional toy manufacturers like JAKKS Pacific have
been encountering sluggish sales due to children's preference for
electronic toys and devices. Hence, management at JAKKS decided
to shift focus to technology-driven toys.
Gross margin in the quarter was 29.4%, down 140 percentage
points year over year, mainly due to weak sales and higher costs.
However, operating margin grew about 90 bps, thanks to lower
SG&A and direct selling expenses, which made up for lower
Following the better-than-expected performance, JAKKS Pacific
reiterated its guidance for 2013. The company expects loss per
share to be near $2.56 in 2013. Net sales are expected to
decrease nearly 7.0% to $620 million. However, the company
expects margins to improve in the fourth quarter.
JAKKS Pacific intends to implement a series of initiatives to
recover its business. In the third quarter, the company initiated
an aggressive restructuring strategy, which included lowering of
leased space, employee costs and other operating expenses.
Management believes that through this program it will rebuild its
business model and regain its financial strength in 2014.
After missing the Zacks Consensus Estimate for bottom line for
six consecutive quarters, JAKKS Pacific finally managed to beat
the same. The company is pinning its hopes on the DreamPlay
product line. Although the company currently carries a Zacks Rank
#5 (Strong Sell), meaningful impact of the DreamPlay line may set
it back on the growth path.
Other toy companies that investors might consider include
Nintendo Co. Ltd.
), carrying a Zacks Rank #1 (Strong Buy), as well as
Take-Two Interactive Software Inc.
), both carrying a Zacks Rank #2 (Buy).
JAKKS PACIFIC (JAKK): Free Stock Analysis
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