While new distribution channels are springing up for toys in the wake of Toys R Us’ demise, Jakks Pacific is taking a cautious approach to make sure the changes take hold with consumers, CEO Stephen Berman said as the company released its Q3 results.

Walmart, Target, Kohl’s, T.J. Maxx, GameStop, Barnes & Noble, Party City (Toy City), dollar stores and drugstore chains are beefing up their toy assortments for the holiday selling season, but “there needs to be caution” in managing shipments, Berman said.

“The retailers are getting very excited,” but “at the end of year you don’t want to be stuck with inventory, so we are managing this very methodically,” Berman said. The Toys R Us business won’t be fully absorbed by other retailers by year-end so “we are very focused on not over-stocking” the distribution channels. Toys R Us. accounted for 11.3 percent of Jakks’ $613.1 million in revenue in the year ended Feb. 28, 2018.

Jakks said it will incur a $2 million charge in Q4 ending Dec. 31 as it cuts 12-15 percent of its employees in consolidating facilities in the U.S. and internationally. The move will generate $10-$15 million in annual savings, about 60 percent of which will come from trimming jobs in the U.S. Jakks had 751 employees as of Feb. 28,  including 409 in the u.S. and 203 in Hong Kong.

Jakks reports a $15.6 million profit in Q3 ended Sept. 30, compared to a $17.6 million loss a year earlier as revenue fell 10 percent to $236 million, due largely to the closing of Toys R Us. Jakks’ girls business saw a 23% revenue drop to $102.3 million as strong sales of Incredibles 2, Fancy Nancy and Perfectly Cute (a private label it sells to Target) were offset by a downturn in Moana, Beauty and the Beast, Frozen and Elena of Avalor.

The boys division recorded a 19 percent revenue increase to $40.6 million, as decreases in Star Wars products were offset by gains with Incredibles 2, Harry Potter and Stanley Black and Decker.  The Halloween Division reported a 12 percent revenue gain to $65.3 million, benefitting from licenses for Overwatch, Halo and L.O.L. Surprise. Sales of preschool products rose 57% to $3.6 million on strong sales of Daniel Tiger’s Neighborhood products.

Jakks’ expects to continue to post revenue gains from Incredibles 2 products, where it is the master toy license, in 2019, given that the film was recently released for streaming and will be available on DVD in two weeks, Berman said.

Contact:

Jakks Pacific, Brent Novak, CFO, 909-594-7771, bnovak@jakks.com