Malibu, California-based JAKKS Pacific Inc (JAKK) recently slashed its sales and earnings outlook for fiscal 2011, owing to the tough retail sales environment amidst the crucial holiday season. The company's results were also unimpressive as it had to bear the brunt of increased markdown allowances and royalty expenses related to license guarantee shortfalls.
For 2011, the company lowered its net sales forecast to $660 million from the previous range of $770 million to $775 million and adjusted earnings guidance to 37 cents to 40 cents from the earlier projection of $1.32 and $1.35 per share.
Management is apprehensive about the remainder of 2011 based on a host of factors including cost inflation, increased pricing pressures, transportation costs and higher costs for many manufacturers operating in Asia that will likely affect production and shipment. This was quiet disappointing; and as a result, the company's share price fell 10 cents to close at $17.45 on Friday.
The Zacks Consensus Estimate for the fourth quarter of 2011 and fiscal 2011 are pegged at 39 cents and $1.33, respectively. We expect estimates to go down in the coming days as the company reduced its fiscal 2011 guidance based on the weak retail sales environment for the upcoming holiday season.
However, one of the major initiatives for JAKK in 2012 is Monsuno. This is an animated Japanese television series, likely to come on air in spring 2012. Based on this television venture, the company has developed a complete Monsuno toy line and plans to launch it next year. Many of the company's other product launches in 2012 look strong. One such initiative is Winx Club, which is an eminent fashion doll in European markets. With Nickelodeon launching the property in the U.S., the line is set to hit the market in fall 2012. Management remains optimistic on Action Cam, a small video camera that can be attached to bicycles, surfboards, skateboards, etc. Further, Tollytots expects to see continued strong growth in 2012 with core large dolls and accessory categories including My First Disney Princess, Graco and Fisher-Price lines. The company estimates 2012 to be more lucrative in terms of other releases including Slug Zombies, Train World, Baby Watch and Pawggles.
JAKKS Pacific currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
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