Edit Metric
|
||||||||||||||||||||
Details
|
||||||||||||||
JAKKS Pacific (JAKK)Stock (Consumer Products Industry, Media & Entertainment Industry, Toys & Games Industry)
 In 2007, 85.3% of JAKKS' revenue came from the United States.[4] The company has benefited from its emphasis on products for the quickly growing video game industry and acquisitions of several companies such as Creative Design and Pet Pal, [5] and revenue increased 12% from 2006 to 2007.[6] In 2008, a slowing economy has hurt the company's sales, and in July the company cut its earnings outlook for 2008.[7] JAKKS Pacific primarily competes with Mattel and Hasbro, the top two toy manufacturers in the United States.[8] Mattel had $5.9B in revenues in 2007, while Hasbro had $3.8B; JAKKS was third in the market at $857M.[9] [edit] Business Overview[edit] Business Segments [edit] Traditional Toys (92% of 2007 Sales)JAKKS' Traditional Toys segment can be divided into eight sub-categories:
[edit] Craft/Activity/Writing Products (5% of 2007 Sales)This segment consists of crafts, activity sets, stationery products, playsets, and lunchboxes. Its craft products are mostly sold under the Color Workshop name, and include products such as Blopens and Vivid Velvet writing instruments and stationery products, as well as activity products under the Flying Color name. JAKKS' playsets and lunchboxes are mostly based on brands such as Nickelodeon, Dora the Explorer, and Pokemon. Revenue in this segment decreased by 24.5% from 2006 to 2007, primarily due to decreases in sales of JAKKS' Flying Colors and Vivid Velvet activity products, and their lines of writing instruments.[1][13] [edit] Pet Products (3% of 2007 Sales)The pet products segment consists of toys, food products, beds, clothing, and accessories that JAKKS produces for pets. JAKKS Pacific manufactures these products under licenses with brands such as American Kennel Club and The Humane Society of the United States, entertainment properties such as Disney, and private label brands such as Totally My Pet. 2007 saw an increase in JAKKS' revenue from this segment, as its sales increased by 20% from the 2006 figures.[1] JAKKS expects to earn a lot of revenue from this segment in 2008 as well, as the company secured a license with Animal Planet for a new line of Pet Products in February of 2008.[10] [edit] Business and Financial Analysis
In fiscal 2007, JAKKS Pacific's 12% increase in revenue was due primarily to the 14.6% increase in revenue from its Traditional Toys segment.[4] Although the traditional industry suffered as a whole,[14] JAKKS' traditional toys were successful primarily because of the booming video game industry and its success with high-demand lines such as its Hannah Montana dolls.[12] Furthermore JAKKS slightly expanded internationally in 2007, obtaining 15% of its 2007 revenue outside of the United States, up from 13% in 2006. In particular, its Hong Kong segment grew in significance in 2007, obtaining 72.4% more revenue than its 2006 numbers.[4] [edit] Legal Issues with the WWEJAKKS Pacific avoided a potentially disastrous event when a 2004 bribery lawsuit filed by World Wrestling Entertainment (WWE), with whom JAKKS has exclusive licensing rights for some of its toys, was thrown out in court. The positive ruling kept JAKKS from losing not only a large deal of money, but its licensing agreement with WWE as well. This is especially important because most of JAKKS' video game products are manufactured under the WWE license, and the 37.7% increase in JAKKS' video game revenue from 2006 to 2007 was influential to its 12% increase in total revenue over that same period of time.[15][4] However, the problems between the two companies caused WWE to sign a new licensing agreement with Mattel in 2010, when its deal with JAKKS runs out. Although JAKKS signed a deal with Total Nonstop Action Entertainment (also for 2010) to make up for this loss, its business expects to suffer once it loses the big name licensing agreement.[16] [edit] Key Trends and Forces[edit] JAKKS relies on a few customers for a large percentage of its revenuesIn fiscal 2007, 48% of JAKKS' revenue came from its three largest customers: Wal-Mart, Target, and Toys 'R' Us. However, JAKKS Pacific's top three customers accounted for only 48% of JAKKS' 2007 revenue, as opposed to the 60% they accounted for in 2006. This 12% drop from its top three customers suggests JAKKS Pacific's growing ability to branch out and find new customers.[17]
[edit] JAKKS Pacific's growing emphasis on products from the increasingly popular video game industry has helped its businessSince 1998, JAKKS has been a part of a joint venture with THQ (THQI), a publisher and distributor in the video game market. As a part of this joint venture, JAKKS Pacific makes games based on World Wrestling Entertainment (WWE), another company with which JAKKS has a partnership. WWE filed a bribery lawsuit against JAKKS in 2004, which JAKKS won in December 2007 when a judge dismissed the case. Nevertheless, JAKKS has maintained its partnership with WWE, and plans to continue to produce WWE-themed video games at least until their licensing deal runs out in 2009.[15] In February 2008, WWE announced that it has secured a licensing agreement with Mattel, to take effect in 2010. At the same time, JAKKS announced that it had secured a deal to manufacture action figures based on rival Total Nonstop Action (TNA) Entertainment to replace its line of WWE toys.[16] In 2007, JAKKS obtained $21.2 million from video game revenue, a 37.7% increase from its 2006 figures. The video game industry as a whole reached all-time highs in 2007, recording $18.9 billion in revenue, up from $12.5 billion in 2006 (a 51.2% increase).[11][18] JAKKS' continued emphasis on products from the rapidly growing video game industry thus benefits its overall business for the foreseeable future. [edit] Rising raw material costs increases JAKKS Pacific's manufacturing costs, but 2007 and 2008 recalls against Chinese manufactured toys are reversing this effect The majority of JAKKS' toys are made with plastics, making the company vulnerable to the rising prices of oil, from which plastics are created.[20] The price of crude oil increased from $66.40/barrel in 2007 to $117.40/barrel in May 2008, a 76.8% increase.[19] In addition, because JAKKS Pacific manufactures many of its toys in China, the strengthening Chinese Yuan has led to increased costs of manufacturing in China, as these costs are in Yuan and JAKKS must convert from weaker dollars to pay these expenses. As of July 2008, the CNY to USD exchange rate was .147, up from .132 the year before.[21] In addition, as a result of a growing number of recalls for toys made in China in 2008, toy distributors have increasingly been looking for toys manufactured in the U.S. and Europe over Chinese manufactured toys. With these trends, JAKKS plans to manufacture more of its toys in the U.S., which will benefit its business.[22] [edit] The decrease in U.S. consumer spending adversely affects JAKKS Pacific's revenueConsumers buy JAKKS' toys and games only when they have enough disposable income to afford such non-necessity goods. Rising oil prices, a struggling U.S. housing market, and other similar factors limited Americans' disposable income in 2007. This trend continued in the first half of 2008, as evidenced by the 76.8% increase in the price of crude oil from 2007 to May of 2008.[19] However, although the declining disposable income contributed to an overall decline in the traditional toy industry ($21.2 billion in 2007 compared to $22.3 billion in 2006), revenue in the video game industry increased from $12.5 billion to $18.9 billion over the same time period. As a result, JAKKS' revenue from its video game products increased substantially, contributing to the company's 12% increase in its overall revenue over the same period of time.[11][14] Nevertheless, the trend of decreasing disposable income is worrisome for the future business of a producer of consumer products such as JAKKS Pacific. The trend is particularly worrisome for JAKKS because it is losing its licensing agreement with WWE, for whom JAKKS helps develop video games, in 2010.[16] [edit] CompetitionJAKKS Pacific is the third largest toy manufacturer in the United States partially because it makes products in several different categories within the toy industry (i.e. video games, traditional toys, etc.). However, many of its competitors specialize in a certain aspect of the toy industry, and as a result, JAKKS' different products compete with different companies. These include:
[edit] References
|
The Shelf
|
Edit
History
Bookmark
