The continued impact of the ongoing COVID-19 pandemic has yielded mixed results for Jakks Pacific Inc. Despite positive gains in certain categories, the company’s third quarter earnings took a hit due to declines in Halloween costumes and licensed goods.
Net sales in Q3 declined 14% to $242.3 million versus $280.1 million in the same period last year. Sales of toys and consumer products fell 8% globally while net sales of Disguise Halloween costumes dropped 27%.
“We faced significant challenges in the quarter, including difficult comparisons against the successful launch of Disney’s Frozen 2 last year and reduced retailer commitments to Halloween products, says Stephen Berman, chairman and CEO, Jakks Pacific. “Excluding declines in Disney Frozen merchandise and Disguise Halloween costumes, our net sales rose 13% compared to the third quarter of last year. Our top three U.S. customers in aggregate reported an increase in year-to-date sell-through of 28% through the first nine months, compared to an increase of 14% through the first half.”
The company reported adjusted EBITDA of $24.3 million, up 56% versus $15.6 million last year.
On a call with investors and analysts, Berman cited category growth in Disney (18%, excluding Frozen), and gaming licenses. “Our Nintendo business was up 60% and Sonic the Hedgehog was up five-fold,” Berman said. Sales of action figures, vehicles, roleplay, and electronics rose 9% driven by the debut of Jakk’s Apex Legends action figure collection, Xtreme Power Dump Truck, and Fly Wheels alongside the aforementioned Nintendo and SEGA properties.
Looking ahead, the company expects to run up against “difficult comps” in the fourth quarter due to last year’s Frozen 2 collection and a shift in select movie licenses into 2021. Pending a return to normalcy next year, Jakks Pacific expects the costume business to rebound due to new and recently announced licenses, some of which have yet to be announced.