Christmas might have come in the third quarter for toymaker Jakks Pacific Inc.

The Malibu company last week reported a 20 percent year-over-year increase in third quarter income, driven by lowered expenses and strong sales of its line of licensed Disney princess dolls. The news caused shares to jump more than 30 percent for the week ended Oct. 23, closing at $6.20 and making it the biggest gainer on the LABJ Stock Index. (See page 50.) Shares continued to rise Oct. 24, though it remained well below its 52-week high of $13.67.

Jakks reported third quarter net income of $36.6 million ($1.11 a share), compared with $30.4 million ($1.10) in the same period a year earlier. Though revenue fell 1 percent to nearly $311 million, it exceeded expectations. Analysts surveyed by Thomson Reuters on average expected net income of $1.05 a share on revenue of less than $298 million.

Cost-cutting helped feed income growth in the third quarter. The toymaker announced layoffs in July and will finish trimming 100 positions, 12 percent of its workforce, by the end of the year. The layoffs, coupled with decreased leasing and travel costs, will help the company save about $8 million, Chief Executive Stephen Berman said in a conference call with investors.

Berman said the cuts created efficiencies that allowed the company to “align our business units to work more closely together and achieve benefits by sharing resources from all areas such as design, R&D, sales, merchandising, just to name a few.”

Several of Jakks’ toy lines, including its 31-inch action figures featuring “Star Wars” and Superman characters, among others, performed well in the quarter.

Jakks is staking much on sales from its DreamPlay Toys joint venture with NantWorks, a vehicle of billionaire Dr. Patrick Soon-Shiong. DreamPlay produces “smart” toys that interact with smartphones and tablets.

Soon-Shiong, too, stands to benefit from Jakks’ success. He bought a 25 percent stake in the company in July, accumulating 1.3 million shares at $7.41 each July 18, the day after Jakks shares plummeted 40 percent from $11.48 on news of poor second quarter earnings. However, the stock last week was still below his purchase price.

“They have DreamPlay and a bunch of other lines. We expect them to complete their restructuring and meet their expectations for the year,” said Edward Woo, an analyst with Irvine’s Ascendiant Capital Markets, who rated Jakks a “buy” in July.

For reprint and licensing requests for this article, CLICK HERE.