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JAKKS Pacific Inc

Introduction:

JAKKS Pacific, Inc. (NASDAQ:JAKK), was founded in 1995, and is based in Malibu, California. The Company designs, produces, and sells toys and related products for children. The Company’s products include action figures, die-cast collectibles and toy vehicles, preschool toys, and a line of fashion dolls and accessories. JAKKS markets its products under brand names such as Road Champs, Remco, and Child Guidance.

Stock Snapshot:

As of Oct 16’ 2012, the stock for JAKKS Pacific, Inc. (NASDAQ:JAKK) closed at USD 13.72, representing a market capitalization of USD 354.55 million. The stock has achieved an average volume of 246,292 shares, whereas the stock has traded between a range of USD 12.18 to USD 19.76 over the last year. The stock has been trading at a P/S ratio of 0.51 and a P/B ratio of 0.95.

Competitor Analysis:

Mattel, Inc. (NASDAQ:MAT), was founded in 1945, and is headquartered in El Segundo, California. The Company, together with its subsidiaries, designs, manufactures, and markets various toy products. Its products comprise fashion dolls and accessories, vehicles and play sets, and games and puzzles. As of Oct 16’ 2012, the stock has been trading at USD 37.2, with a total market capitalization of USD 12.68 billion. The stock has been trading at a P/E ratio of 16.73, a P/S ratio of 2.03, and a P/B ratio of 4.9.
Hasbro, Inc. (NASDAQ:HAS), was founded in 1923, and is headquartered in Pawtucket, Rhode Island. The Company, together with its subsidiaries, engages in the provision of children’s and family leisure time products and services worldwide. As of Oct 16’ 2012, the stock has been trading at USD 38.38 with total market capitalization of USD 5  billion. The stock has been trading at a P/E ratio of 14.04, a P/S ratio of 1.2 and a P/B ratio of 3.57

Financial Analysis:

Revenue:

For 6MFY12, the net sales of Traditional Toys and Electronics segment were USD 113.6 million compared to USD 105.9 million for the corresponding period last year; representing a YoY increase of 7.3%. This was mainly due to the introduction of new toy lines and an increase in volumetric sales for the current toy lines, such as the “Cabbage Patch Kids” line.

For 6MFY12, the net sales of the Company’s Role Play, Novelty, and Seasonal Toys were recorded at USD 105.2 million, as compared to USD 98.4 million for the corresponding period last year, representing a YoY increase of 6.9%. The increase in net sales was primarily due to increases in volumetric sales of the Company’s  Halloween costumes and accessories, and kids outdoor furniture and activity tables, offset in part by decreases in unit sales of the Company’s  role play and dress-up toys.

Cost of Sales:

For 6MFY12, the cost of sales of the Company’s Traditional Toys and Electronics segment was USD 75.2 million (representing 66.2% of net sales), compared to USD 71.7 million (representing 67.7% of related net sales) for the corresponding period last year. This represented YoY increase of 4.9%, which is in line with the volumetric growth in sales witnessed during the current year. The overall improvement in gross margin relating to this segment was mainly due to a change in product mix.

For 6MFY12, the cost of sales of the Company’s Role Play, Novelty, and Seasonal Toys segment was USD 73.1 million (representing 69.5% of related net sales), compared to USD 63.2 million (representing 64.2% of related net sales) for the corresponding period last year. This represents a YoY increase of 15.7%, which is in line with the volumetric growth in sales.

Earnings Analysis:

For 6MFY12, the Company reported net loss per share of USD 0.61, as compared to a net loss of USD 0.23 for the corresponding period last year. This was mainly due to very high selling and general and administrative expenses, which were recorded at USD 89.8 million for 6MFY12, as compared to USD 82.2 million for the corresponding period last year. Selling, general, and administrative expenses were also high as a percentage of sales, due to additional overhead resulting from the incorporation of Moose Mountain (which was not included in prior year) and other non variable expenses.

Factors to Watch Out:

  • Net loss represents a worrying aspect!
  • Company recently slashed its earnings outlook!