The impact and uncertainty of this year’s trade war, driven by President Trump’s tariff policies, is hitting toy industry earnings.
JAKKS Pacific reported a second-quarter dip in net sales to $119 million — down 20% from last year. The slowdown was driven in part by higher import costs that impacted direct-to-retail shipments. Domestic sales took the brunt of the hit, falling 31% to $87 million. On the flip side, international markets delivered a bright spot, with net sales spiking a whopping 41% to $32 million.
Despite the topline decline, new product launches helped push gross margin to 32.8%, a modest increase from 32% in Q2 2024. The company posted a $2.8 million operating loss, compared to a $7.6 million gain last year, and reported adjusted net income of $0.4 million, or $0.03 per share.
As challenging as this year is proving to be, we feel our first half results demonstrate that we are managing our business well despite the persistent uncertainty we’ve all been navigating, In a company of our size, we are constantly reminded that there are decisions and actions within our control and external influences that we must try to anticipate and adapt to when necessary. I feel we are capitalizing on our decades of experience and relationships to work through these challenges from a position of strength and remain confident about where we are headed."
For the first half of 2025, JAKKS’s revenue was $232.3 million, a 3% drop from the previous year. While the company’s Disguise costumes division saw sales slide 13%, the core Toys/Consumer Products business held steady.
“Our Costumes business is one that, in many ways, has suffered the most from recent events,” Berman explained on JAKKS’ Q2 call with analysts. “A large portion of the decline in the quarter happened here as we had some of our large cancellations in Q2 when tariffs were 145%. This is a business where customers review product lines late in the calendar year and make and ultimately finalize their commitments early in the year. That is the time that allows for manufacturing to be scheduled and product to be shipped and sold in Q2 and Q3.”
That said, Berman believes that box office success this year will drive sales heading into Halloween and notes that next year’s slate bodes well for JAKKS’ licenses.
While JAKKS is pursuing domestic manufacturing options in the U.S. where it makes sense, Berman notes that China remains the central production hub and that flip-flopping tariff rates negatively impacted the company’s mitigation strategies, including production shifts from China to Vietnam or other countries. In one case, JAKKS moved production of its skateboards and some large plastic toys to Mexico, only to see tariff rates spike to 30%, negating any savings.
Despite the challenges, JAKKS’ gross profit rose 14% to $78 million, and improved efficiency helped trim the operating loss to $6.5 million. Adjusted EBITDA swung into positive territory at $2.7 million, reflecting cautious optimism for the second half of the year.
