Jakks Pacific sinks after 'Frozen,' yet to spin up ahead of 'Sonic the Hedgehog'

Toy manufacturer JAKKS Pacific Inc. has launched an agreement with Sega Sammy Holdings Inc.'s Sega of America to produce toys and costumes for the next installment of the "Sonic the Hedgehog" movie series. The company's brand partnership approach has not prevented a downturn in its revenues, which fell 15.8% year over year in the fourth quarter of 2020. That was largely due to a drop in revenues from products linked to Disney's "Frozen" franchise, but excluding those, the company declared revenue growth of 16.0%.

Panjiva's data shows that U.S. seaborne imports linked to Jakks Pacific fell 22.9% year over year in the fourth quarter of 2020, in part due to a 24.8% slide in shipments of toys alongside lower imports of outfits linked to the weaker Halloween costume season. The downturn has continued in January, with total U.S. seaborne imports linked to the company down 44.0% year over year — making imports for the new "Sonic the Hedgehog" franchise more important.

In common with other major toy companies, as outlined in Panjiva's February research, Jakks Pacific has faced "freight costs [which] started rising sharply as the holiday season approached," according to CEO Steve Berman. He also said that they believe "there were COVID-related worker shortages at docks and among truckers, which also raised costs," although the company has partly "mitigated that" through cost-cutting.

Unlike Jakks Pacific, though, many toy manufacturers had increasing imports at the start of 2021, which may bring lower profit margins because of the higher freight costs. Imports linked to Hasbro Inc. and Mattel Inc. in January climbed 31.7% and 15.2%, respectively, reflecting the wider product portfolios and a degree of catch-up after a lackluster start to the peak season.

Shipments linked to mid-tier manufacturers of original rather than franchised brands, including WowWee USA Inc. and TOMY Company Ltd., also increased 88.6% and 8.8%, respectively. That marks a turnaround from an earlier downturn and potentially indicates the late delivery of products held up by port congestion in late 2020. Spin Master Corp., which has a focus on mostly TV brands, has seen a similar performance to Jakks Pacific with a decline of 30.5% in January.

Christopher Rogers is a senior researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.