Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Jakks Pacific Inc (JAKK, Financial) reported year-over-year sales increases across all three toy consumer product divisions in Q3 2024.
- The company remains debt-free, providing financial strength and flexibility for future initiatives.
- International markets, particularly Latin America, showed significant growth with a 48% increase in Q3 sales compared to the prior year.
- Jakks Pacific Inc (JAKK) has successfully expanded its retail presence with exclusive products and additional shelf space globally.
- The company maintains a strong focus on accessible price points, with over half of its sales volume driven by products priced at $30 or less.
Negative Points
- The action play and collectible business was down 9% year-to-date, partly due to timing issues with movie releases.
- The European and Asia Pacific regions experienced sales declines of 3.8% and 3.4% respectively in Q3.
- Retailers are actively destocking, leading to soft sell-through across the industry, although Jakks Pacific Inc (JAKK) is performing better than most.
- Creditworthiness of some retailers remains a concern, with a 1% year-over-year sales decline attributed to deteriorating credit situations.
- The company faces challenges in maintaining or expanding margins due to consistent fixed cost increases without scale leverage.
Q & A Highlights
Q: Can you discuss the opportunities in the outdoor segment, particularly with the Authentic Brands Group?
A: Stephen G Berman, CEO: We recently launched the Element portion of our initiative with the Authentic Brands Group at Academy, and the initial sell-throughs have been tremendous. We plan to expand the product range in spring with Element Skateboards and Roxy Floaties. Our existing seasonal products like ball pits and outdoor furniture are seeing better comparisons, and we expect growth in 2025. The segment is diverse, including brands like Quicksilver, Roxy, and Juicy Couture, and licenses with Mattel and Spinmaster.
Q: How do you view the potential of upcoming movies like Dog Man and Moana Two for 2025?
A: Stephen G Berman, CEO: Dog Man has strong potential with over 60 million books sold and significant trailer views. We are cautiously optimistic and will manage inventory conservatively. Moana Two launches this November, and we expect strong performance, especially when streaming begins. Sonic Three is also anticipated to drive sales into 2025. We have a robust lineup of IPs, including Minecraft and Harry Potter, which will support our growth.
Q: Can the Target private label product be leveraged into other accounts?
A: Stephen G Berman, CEO: The Target initiative has been successful, and we plan to expand the portfolio with them. We are also exploring international opportunities and will announce new initiatives in the private label program with other major retailers in the first half of 2025.
Q: What are your thoughts on the importance of IP being associated with hit films?
A: Stephen G Berman, CEO: While theatrical IP is important, non-theatrical IP like Disney's Princess Style Collection also performs well. Our business with Disney is strong without heavy reliance on new IP. We focus on a portfolio management approach, leveraging both theatrical and non-theatrical IP, and exploring diverse distribution platforms beyond traditional toy trade.
Q: How do you view competition and securing additional shelf space with new product initiatives?
A: Stephen G Berman, CEO: The toy industry is changing, and we focus on providing great products at great prices to gain shelf space. We are known for quick market reactions, which helps us fill gaps when competitors face issues. We also leverage exclusive products and out-of-aisle placements to increase our retail footprint.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
