Toys R Us Inc.’s move to seek bankruptcy protection at the onset of the holiday season is expected to add to the recent woes of two of L.A.’s largest toymakers, Jakks Pacific Inc. and Mattel Inc.
Santa Monica-based Jakks, which manufactures many Disney products, and El Segundo-based Mattel, a household name with its Barbie and Hot Wheels toys, both sell their products at the retailer.
Jakks said in a news release after the bankruptcy announcement that it is expecting a net loss and negative earnings per share for 2017 as a result of the recent filing.
“Sales to Toys R Us were anticipated to account for approximately 5 percent to 6 percent of the company’s net sales for the third and fourth quarters, but the company does not know what amount of such sales will be realized,” Jakks said.
The toymaker also said it has accounts receivable due from Toys R Us that might not be paid, representing less than 3 percent of its outstanding accounts.
The company reported that net sales fell in the second quarter to $119.6 million from $141 million a year ago. It attributed the decline to underperforming licensed film-related properties as well as the suspension of sales with a retailer. The company reported a loss of $16.7 million in the second quarter.
The second-quarter sales decline marked a continuation of a dip that took Jakks’ annual net sales down to $706 million from $745 million in 2015. Its net income dropped to $1.2 million from $23 million over the same period.
Mattel depends even more on Toys R Us, which accounts for 11 percent of its net sales, according to a 2016 filing with the Securities and Exchange Commission.
The manufacturer didn’t directly acknowledge the impact of the Toys R Us bankruptcy.
Stephanie Wissink, senior analyst at New York equity research firm Jeffries, said in a report that the retail chain’s bankruptcy filing hits the toymaker at a stressful time.
Mattel reported net sales increased to $974 million in the second quarter from $957 million in the same period last year. The company posted a loss of $56.1 million in the second quarter.
Like Jakks, however, the company’s annual sales declined in 2016, falling to $5.4 billion from $5.7 billion in 2015 while net income dropped to $318 million from $369 million. Mattel attributed the decline to several factors, including declining sales of its Barbie line last year and a shortfall on a goal of $300 million in sales in toys related to the “Cars” movie franchise.
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