Operational initiatives show progress amidst continued cost pressures from 2019.
Spin Master has announced its financial results for the first quarter ended 31st March 2020.
The company’s gross product sales have increased 0.7% to $242.3m, up from $240.5m, driven primarily by Activities, Games & Puzzles and Plush, as well as Boys Action & Construction. The former is up 24% thanks to the popularity of Kinetic Sand and Games & Puzzles, while the strength of the Boys Action & Construction portfolio is down to sales of DC licensed products, Bakugan and Tech Deck.
In other categories, decreases in gross product sales have been reported; Remote Control and Interactive Characters decreased by $10.9m (35%) to $20.2m, Pre‑School and Girls decreased by $6.9m (10.9%) to $56.5m, and Outdoor decreased by $5.2m or (15.5%) to $28.4m.
Gross profit has been reported at $90.8m, representing 39.9% of revenue, compared to $107.7m (45.1% of revenue). Spin Master says the decrease in gross margin was primarily due to higher freight, reconfiguration expenses, inventory provisions, sales allowances and lower other revenue, but that it was partially offset by favourable changes in product mix.
Spin Master withdrew its 2020 outlook on 19th March, which had been released a couple of weeks earlier. Given the uncertain environment associated with Covid-19, the company has elected to suspend the provision of guidance ‘until circumstances warrant’.
“Q1 2020 was a challenging quarter for Spin Master, as we dealt with both the evolving Covid-19 situation and the carryover effects from the operational challenges we experienced in the second half of 2019,” said Ronnen Harary, Spin Master’s co-chief executive officer. “Covid-19 first affected our Asian supply chain early in Q1 and we worked extremely hard to stabilise it by the end of the quarter. As the virus spread to customer markets, we adapted quickly and implemented measures to minimise the potential impact to our people and to Spin Master as a whole. Our POS in the quarter was up significantly over last year, particularly for categories such as games, puzzles, activities and arts and crafts as well as demand for our entertainment content and digital gaming, as consumers looked to occupy their children whilst at home. We have made significant progress in resolving the operational challenges we faced in 2019 and are well positioned for the second half of 2020. We are focused on keeping our team safe and productive, keeping costs down and managing our cash flow prudently whilst continuing to invest for the long term. We believe in the underlying resilience of the toy industry and our diversified portfolio of brands, entertainment properties and digital toys. Our commitment to our strategy and our strong financial base position us for long term success.”