Spin Master faced off against the same first quarter challenges affecting the rest of the toy industry this year.
The company behind PAW Patrol says that its Q1 revenue slipped 36% to $271.4 million from $424.2 million during the same period last year. Toy revenue declined by a whopping 46.9% alongside a 7% dip in the company’s Digital Games sector. The losses were partially offset by a 69.4% increase in Entertainment revenue.
“Our first quarter performance was ahead of expectations and reflects encouraging entertainment and digital games performance. We saw continued pressure from excess toy inventory at retail and retailer caution, alongside the return of historical seasonality for toy gross product sales,” says Spin Master’s Global President and CEO Max Rangel. “In 2023, we will bring breakthrough innovation to the toy aisle, alongside impressive launches within our core and licensed brand portfolios. Our investment in the creation of multi-platform content will be fully realized with the release of our most diverse entertainment slate to date, including the highly anticipated second PAW Patrol theatrical release and two new original series, which are expected to drive new licensing and merchandising opportunities.”
Mark Segal, Spin Master’s Chief Financial Officer, says that carryover inventory from the 2022 holiday season and the subsequent clearance pricing made a dent alongside challenging comps as the company went up against movie-related launches in Q1 2022.
“We expect retail inventory headwinds to be over by the end of the second quarter. An anticipated shift back to more normal toy seasonal revenue patterns supports our expectation of strong year-over-year revenue growth in the second half of 2023,” Segal adds.
An Update on Acquisitions:
Spin Master continues to grow its product portfolio through strategic acquisitions. Two deals closed in Q1, including its acquisition of certain assets of 4D Brands International ($20.2 million) and the purchase of Innovation First International’s HEXBUG brand ($15.5 million). Near the end of Q1, Spin Master acquired certain intellectual property (IP) from Mondrian Blocks, a Hungarian company ($3 million).
Future Guidance:
For 2023, Spin Master believes that gross product sales for toys will be flat or slightly down compared to last year. Additionally, the company expects that 2023 revenue, excluding PAW Patrol: The Mighty Movie distribution revenue, will be on par with last year’s earnings.
