JAKKS Revises FY17 Guidance Post Toys 'R' Us Bankruptcy
Zacks Investment Research | Sep 20, 2017 09:49PM ET
JAKKS Pacific, Inc. (NASDAQ:JAKK) recently stated the anticipated effects the company will face due to a bankruptcy filing by its significant partner, Toys ‘R’ Us.
In its previous guidance for the third- and fourth-quarter 2017, JAKKS Pacific projected Toys ‘R’ Us sales to account for 5% to 6% of total sales. However, the realization of this looks unlikely right now.
Moreover, the company expects to incur a net loss and record negative earnings per share for the full year.
Meanwhile, JAKKS Pacific expects charges in cash due to write-off of bad debt and minimum guarantee shortfall, and non-cash charges owing to impairment of some assets as well as goodwill from acquisitions. Markedly, these charges will be against the company’s 2017 income.
Though the company continues to expect positive EBITDA for the year, the figure is anticipated to be lower year on year.
For several years, Toys ‘R’ Us has been plagued by headwinds such as huge debt and heightening competition, especially from e-commerce giants such as Amazon.com, Inc. (NASDAQ:AMZN) that offer better prices to customers. This led to the company file for Chapter 11 bankruptcy protection.
For JAKKS Pacific, the uninsured part of the amount due from Toys ‘R’ Us comprises less than 3% of the company’s outstanding accounts receivable. More than JAKKS Pacific, the bankruptcy ado is more likely to affect the two leading U.S. toymakers —Mattel, Inc. (NASDAQ:MAT) and Hasbro, Inc. (NASDAQ:HAS) .
Overall, the recent challenges faced by the retail environment for toys due to shift in consumer’s taste and preferences are concerning. The emerging smart technologies and digital gaming companies are also posing a threat to traditional toy makers.
Nevertheless, in the long run, JAKKS Pacific is not anticipating any adverse materialimpacts that can possibly pose a hindrance tothe company’s ability to carry out its on-going corporate initiatives and business operations. The company plans on continuing with its relentless effort in digitally innovative toy making.
Consequently, shares of the company have declined 38.8% year to date, underperforming its Zacks Investment Research
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