JAKKS Pacific Inc.
) posted adjusted earnings of $1.13 per share in the third
quarter of 2012, lower than the Zacks Consensus Estimate of $1.15
but higher than the year-ago earnings of $1.11 per share.
On GAAP basis, reported earnings of $1.10 per share were in-line
with the year-ago level. Reported income included financial and
legal advisory fees. However, the company's revenue declined 5.4%
year over year to $314.5 million in the third quarter, missing
the Zacks Consensus Estimate of $318.0 million.
Lower domestic product sales coupled with decline in product
orders before the crucial holiday season led to the top- and
Gross margin in the quarter was 30.8% versus 31.8% in the
comparable quarter last year. The decline in margin was a result
of a shift in product mix leading to increased product costs and
Selling, general and administrative expenses (including direct
selling expenses and depreciation and amortization) climbed up to
$59.4 million or 18.9% of net sales from $55.6 million, or 16.7%
of net sales, last year.
At quarter-end, JAKKS had cash and cash equivalents and
marketable securities of $140.8 million versus $257.3 million at
December 31, 2011.
Prior to the earnings release, JAKKS had lowered its outlook for
fiscal 2012. The company cut its adjusted earnings per share
guidance to the range of 68-74 cents from the earlier projection
of $1.04-$1.08. The company also curtailed its sales guidance to
the range of $690-$700 million from the previous range of
JAKKS foresees a better business environment for itself in 2013
and remains upbeat regarding its strong product line-up that
includes the launch of DreamPlay products as well as core product
We have a bearish view on the stock based on its top- and
bottom-line miss, lowered outlook for the full-year as well as
decelerating margins. The company also had to bear the brunt of
higher costs, including marketing and advertising expenses as
well as minimum license royalty guarantees. Decreased guidance
underscores management's apprehension regarding a tough retail
environment in 2012.
JAKKS Pacific, which competes with the likes of
), currently carries a Zacks #5 Rank, which translates into a
short-term 'Strong Sell' rating. We are maintaining our long-term
Underperform recommendation on the stock.
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