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JAKKS Pacific's (JAKK) Q4 Earnings, Revenues Miss Estimates

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JAKKS Pacific, Inc. (JAKK - Free Report) reported lower-than-expected results in the fourth quarter of 2017.

Adjusted loss of 61 cents per share was wider than the Zacks Consensus Estimate of a loss of 11 cents and the year-ago quarter’s loss of 47 cents.

Net sales in the fourth quarter totaled $136.6 million, lagging the consensus mark of $155.9 million by 12.4%. The top line also fell 18.2% year over year.

Notably, the company’s shares have lost 59.1% in the past year, underperforming the industry’s gain of 37.5%.

The challenging industry scenario for traditional toymakers have affected JAKKS Pacific’s results. Tighter retail inventory management and the recent Toys ‘R’ Us bankruptcy filing added to the woes.

Let’s delve deeper into the numbers.

Operating Highlights

Adjusted gross margin in the fourth quarter was 22.1%, down 910 basis points (bps) from the prior-year quarter. Gross margin was negatively impacted by minimum guarantee shortfalls, inventory impairment and the impact of low-margin sales in the quarter.

Operating costs in the quarter came in at $56.7 million. Adjusted EBITDA was negative $6.8 million against positive $4 million in the prior-year quarter.

Balance Sheet

As of Dec 31, 2017, cash and cash equivalents were nearly $65 million, compared with $86.1 million as of Dec 31, 2016. Net inventory decreased 22.5% year over year to $58.4 million in 2017.

Long-term debt in 2017 totaled $133.5 million, down from $203 million at the end of 2016.

Net cash from operating activities for the quarter was $17.2 million, compared with $37.4 million in the prior-year quarter.

2017 Results

For 2017, net sales came in at $613.1 million, down 13.2% from $706.6 million in 2016. Gross margin in the year was 25.4%, down 620 bps year over year.

Operating costs for 2017 were $219.8 million. Net loss totaled $3.89 per share, wider than earnings of 7 cents per share in 2016. Adjusted EBITDA in 2017 was $15.8 million, compared with adjusted EBITDA of positive $41.7 million in 2016.

The company expects sales to grow modestly in 2018 attributing to profits as the year passes.

 Zacks Rank & Peer Releases

JAKKS Pacific carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hasbro (HAS - Free Report) posted mixed fourth-quarter 2017 results, with earnings of $2.30 per share surpassing the consensus mark of $1.82 by 26.4%.

Mattel (MAT - Free Report) reported lower-than-expected results in the fourth quarter of 2017. Adjusted loss of 72 cents per share compared unfavorably with the Zacks Consensus Estimate for earnings of 17 cents and the prior-year quarter’s 52 cents.

Upcoming Peer Release

Nintendo (NTDOY - Free Report) is expected to report quarterly numbers on Feb 27, 2018. The company’s 2018 earnings are projected to grow 273%.

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