The first quarter was not kind to Spin Master. The Toronto-based toy and entertainment company reported its first quarter earnings this evening, missing the mark and coming in below expectations. The disappointing numbers reflect a gross product sales decrease of 16.5% to $240.5 million in the first quarter of 2019, down from $288.0 million in the first quarter of 2018.
Gross product sales fell 23.4% in North America, 3.2% in Europe, and 6.3% in the rest of the world. Gross profit decreased 27.6%, and overall gross revenue fell to $239 million, a decrease of 16.3% from $285.7 million a year ago.
“Our results for the first quarter fell below the prior year’s performance, reflecting the absence of shipments to Toys “R” Us as well as the shift in the timing of Easter. Q1 saw a number of successful toy license partnership launches, including Monster Jam and How To Train Your Dragon, our relaunch of the Bakugan toy and TV franchise, and Abby Hatcher, our new preschool TV series,” says Ronnen Harary, Spin Master’s chairman and co-CEO. “We are maintaining our outlook for 2019 and expect that the balance of the year will be more reflective of the underlying strength of our business. We manage Spin Master for the long term and as we execute through the tail-end of a very disruptive retail environment, we are confident that we are well positioned to drive profitable long-term growth.”
The Drop Zones:
- Sales in interactive characters and remote control (a category currently in industry-wide free fall) dropped a staggering 65.9%, with Hatchimals, Luvabella, and Zoomer cited for the fall.
- The preschool and girls category fell 23.3%, with decreases in PAW Patrol offset by Twisty Petz. While it’s still a powerful brand, PAW Patrol peaked awhile ago. This is where Abby Hatcher needs to kick in.
- Outdoor brands such as Swimways, Kelsyus, Coop, and Aerobie decreased by 15.9%. Cooler temperatures in the U.S. is likely a big factor here.
The Rising Stars:
- A 195.5% increase in boys action and high-tech construction is a high note. Sales of DreamWorks Dragons, Monster Jam, and Bakugan products are highlighted, partially offset by declines in Flush Force, Tech Deck and Meccano. This will be a category to watch for the long term, as Spin Master takes over the DC Comics license next year.
- Activities, games & puzzles and plush increased 9.4%. Increases in Kinetic Sand and Cool Maker are drivers, in addition to brisk sales on GUND plush. Declines are noted for Bunchems, and the games division, which includes Cardinal. Recent moves, like a fresh deal with Big Potato Games should help here.
“We remain focused on executing against our four key growth strategies, which we believe provides us with a strong platform for sustainable long-term success,” says Ben Gadbois, Spin Master’s president and COO. “We are confident that Spin Master can deliver solid growth in the second half of the year. The underlying strength of our global infrastructure and our innovative portfolio of products, complemented by engaging entertainment, new licenses, and a strong balance sheet, positions us well to drive profitable growth in the near and long-term, both organically and through strategic acquisitions.”
Spin Master’s Four Key Growth Strategies:
- Innovating across the portfolio;
- Developing evergreen global entertainment properties;
- Increasing international sales in developed and emerging markets; and
- Leveraging the Company’s global platform through strategic acquisitions.
A call with investors is scheduled for Thurs., May 9, at 9:30 a.m. ET.