Jakks Pacific reported its third quarter earnings today with a 2% decline in total sales attributed to supply chain challenges. Net sales hit $237 million for the quarter, down from $242.3 million during the same period last year.
Overall toys and consumer products sales slipped 8% in Q3 though the company experienced strong growth in the first nine months of 2021. Jakks says that sales grew 11.8% in the first nine months of the year and that toy and consumer products POS sales are up 9% year-to-date. The company’s year-to-date operating income is more than $35 million, its best position since 2015. Additionally, Disguise — its costumes and seasonal division — is up more than 21% this year, with Q3 sales up 16% amid better-than-2019 pre-pandemic sell-through.
“Our focus on improved product margins and cleaner retail sell-through helped mitigate higher ocean freight costs to improve our year-over-year gross margins for the seventh straight quarter,” says Jakks Pacific Chairman and CEO Stephen Berman.
On a call with investors late this afternoon, Berman noted that this year’s Halloween season is “doing great” and “bodes well” for Disguise as the growing division looks ahead to new licenses and partnerships set to debut in 2022. Additionally. Berman notes that Q4 is shaping up strong.
“As we hoped, consumers have embraced the Halloween season this year with a burst of pent-up demand,” Berman says. “Sell-through rates are exceeding 2019 levels. As we look ahead into Q4 we’re excited to be introducing some key new items for the Holiday gift-giving season, including our Nintendo Super Mario Deluxe Bowser’s Airship Playset and our Sonic the Hedgehog Giant Eggman Robot Battle Set, both of which have received strong retailer and consumer reaction.”
Supply Chain Impact
Jakks says that customer orders outpaced its ability to secure ocean passage for its FOB shipments in Q3 and that the “extended domestic importation timeline” has also been a major factor. Overall, any sales declines were attributed to logistical challenges rather than less demand for any product or brand.
“Jakks was started as an FOB business and we continue to do more than 50% of our sales that way today,” Berman says. “This focus has benefited us all year, inclusive of Q3, leveraging the supply-chain strength and scale of the major global retailers to pull our product through to the retail shelf during this period of significant supply-chain disruption. We have accelerated our imports of inventory to support sales in the U.S. and Internationally for the holiday season and resetting for the new year. Consistent with recent quarters, we continue to see tremendous consumer and customer reaction to our current product line-up, but supply-chain bottlenecks weighed on our results.”
Despite supply chain challenges, Jakks joins peers, including Mattel and Hasbro, as well as third-party organizations, such as the National Retail Federation in maintaining an optimistic outlook for the Q4 holiday season.
