Stephen Berman, chief executive of Jakks Pacific Inc., said his company was expecting big things this year from its partnerships with Nintendo Co. Ltd. and The Walt Disney Co.
Berman said during a recent conference call to discuss fourth-quarter financials of the Santa Monica-based children’s toy and product manufacturer that its Nintendo line of products helped fuel its full-year growth.
“In our Nintendo business, both our Mario Kart 24V Ride-on Racer and Let’s Go, Yoshi Interactive Action Figure had great launches,” Berman said, adding that its remote-controlled Sonic the Hedgehog toy inspired by the “Sonic the Hedgehog 2” movie had a great year in 2022, and that its Disney Princess Style Collection kitchen playset and suitcase continued to deliver.
“I’m happy to report that in total, seven of our top largest toy consumer products segments grew in calendar year 2022,” Berman said. “We had a very strong holiday season led by key SKUs across our major brands. And our Disney Encanto Magical Casa Madrigal (playset) … has been such a great item for us.”
Approximately 50% of Jakks’s annual sales are tied to Disney licenses.
The company reported an adjusted net loss of $14 million (-$1.44 a share) for the quarter ending Dec. 31, compared with adjusted net income of $1.3 million (14 cents a share) in the same period of the previous year. Revenue decreased by 30% from the fourth quarter of the prior year to $132 million.
Berman attributed the drop in revenue to changes in seasonality for Jakks and to prioritizing free on board selling early last year.
According to website Investopedia, free on board is a shipment term that defines the point in the supply chain when a buyer or seller assumes responsibility for the goods being transported.
The company’s share price has fluctuated this year, gaining 22% in value since the start of the year. It closed at $20.64 on April 20.
At least two analysts who follow the firm rate its shares as buy.
Andrew Uerkwitz, an equity analyst with Jefferies LLC, wrote in a research report that the company does not give official guidance, but called out the tough comparisons of “Encanto” and “Sonic 2” against “The Super Mario Bros. Movie,” live action Disney (“The Little Mermaid” coming this summer), and its own IP, Ami Amis, a line of plush figures.
“The movies themselves look to (compare) nicely, but Jakks had a higher share of the “Encanto” and “Sonic 2” toys (last year) vs. this year,” Uerkwitz wrote in the note.
Gerrick Johnson, an analyst with BMO Capital Markets, wrote in a research report that action play and collectible sales decreased by about 6%, offset by strength in video game toys.
“This year Jakks will be making toys products in support of the Super Mario Brothers movie. Early reads on Mario sell-through are very positive,” Johnson said in the note.
The company was extremely excited for fans to see the movie and the product, Berman said during the conference call.
“And (if) our experience with Sonic the Hedgehog is any indication, the (film) will bring new fans into the franchise to discover both our movie products, as well as our deep catalog of Super Mario toys we’ve been building for several recent years,” Berman added.
