JAKKS Pacific Inc.
) adjusted loss of $1.24 per share in the fourth quarter of 2012
was substantially wider than the Zacks Consensus loss estimate of
14 cents per share and the year-ago loss of 72 cents per share.
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On a reported basis, including the impairment of deferred tax
assets and advisory fees, loss per share was $5.45 per share
versus loss of 77 cents per share in the year-ago quarter. The
company's revenues declined 5.4% year over year to $133.5 million
in the fourth quarter, also missing the Zacks Consensus Estimate
of $147.0 million.
Lower domestic product sales amid a difficult retail environment
have led to the top-and bottom-line miss and year-over-year
decline. Jakks Pacific has become a victim of the change in
children's play pattern in recent years. Toy manufacturers have
to battle a broad array of alternative devices including video
games, MP3 players, tablet, smartphones and other electronic
devices. Hence, specialty toy retailers have lost market share to
mass merchants in recent years due to this change.
In 2012, loss per share was 39 cents versus earnings of 41 cents
in 2011. Total revenues were $666.8 million, down 1.6% year over
year. Lack of demand for several of its key products led to the
lackluster performance in 2012.
For 2013, the company expects earnings per share to be in the
range of 63-68 cents per share. Net sales are expected to
increase 4.0% to 5.0% in the range of about $694-$700 million.
JAKKS foresees a better business environment for itself in 2013
and remains upbeat regarding the opportunities in China.
However, the company expects the first quarter to be slightly
weaker. In the first quarter the company expects loss per share
in the range of 83-85 cents, wider than the year-ago loss of 62
cents per share. Its net sales are expected to range between $70
and $73 million, which is also lower than year-ago sales of $73.4
We believe, incremental operating and marketing expenses
associated with the launch of the DreamPlay product line in the
quarter, which sees seasonally low volumes, compelled Jakks
Pacific to guide lower than the first quarter of 2011.
Additionally, incremental operating expenses associated with the
Maui Toys acquisition will also take a toll on the company's
We have a bearish view on the stock based on its top- and
bottom-line miss and year-over-year decline on both lines. The
company also had to bear the brunt of higher costs, including
marketing and advertising expenses as well as minimum license
royalty guarantees. The company needs novelty in its product
launches to cope with the change in the play pattern of children
as several of its key products lack demand.
JAKKS Pacific currently carries a Zacks Rank #5 (Strong Sell).
One of the major toy companies
) also missed on both the counts in its fourth quarter while
) fourth-quarter 2012 adjusted earnings per share were in line
with the Zacks Consensus Estimate. However, its revenues missed
the same. In the current context, one toy and gaming company
worth a look is
Take-Two Interactive Software Inc.
) with a Zacks Rank #2 (Buy).