The Q4 report released by JAKKS Pacific, Inc. (NASDAQ: JAKK) last week is not actually the kind that makes investors happy. A loss of $1.24 per share was reported as opposed to $0.72 per share in Q4 2011. The full year update saw EPS plummeting to $0.39 as opposed to $0.41 in 2011, and total revenues were down 1.6 percent to $666.8 million. Many analysts attribute the decline to changes in consumer behaviour, especially now that kids have different options such as smartphones, iPods, and game consoles, for entertainment and play.
Thus, it seems that JAKKS is currently losing its clout because the present generation of kids appear to want more in the form of games and entertainment than just toys. In fact, to digress a bit, electronic game manufacturers such as Sony Corporation (NYSE SNE) also have to constantly be on top of their games to stay relevant in an industry with fast-changing consumer patterns. However, despite the fact that gaming habits are changing; some gaming elements that have proven to be truly iconic will likely remain so for a long time. It is on the strength of these iconic elements that JAKKS is setting its sights in developing new product lines which may revolutionize sales and make investors happy once again.
The first brand that will form the basis of a new product line for JAKKS is actually not one but a whole line of Nintendo Co. Ltd. (TYO: 7974) characters that are loved by millions. According to recent news on Business Wire, JAKKS "has been granted rights in major toy categories by Nintendo of America Inc. to manufacture market and distribute a line of toys and related consumer products based on a robust library of iconic Nintendo characters". More so, "JAKKS' Halloween costume division, Disguise Inc., has been given rights to offer Halloween costumes and accessories based on these Nintendo properties". Jack McGrath, the COO of JAKKS Pacific says, "Nintendo is a classic brand rich in content that appeals to today's kids, parents and collectors alike and we are excited to partner together to bring their video game heritage to life in the toy aisle. We are looking forward to expanding our top-tier roster of properties through this comprehensive licensing deal, which covers a wide array of category rights for almost all Nintendo properties, and for nearly all worldwide territories."
The second brand that will raise sales for JAKKS Pacific in the not too distant future is El Chavo. Accordingto Stephen Berman, the President and CEO of JAKKS Pacific, Inc., "With millions of viewers around the world every day, and loved by generations of Latinos, 'El Chavo' is the perfect property to develop toys and other products around. Our product line will bring to life the charm of the characters and their community, allowing old and new fans the opportunity to immerse themselves in the captivating and loveable world of El Chavo."
Conclusively, while JAKKS traded down 6.32 percent to close at $11.41 on March 1, we can be hopeful that Mario and Luigi, Donkey Kong, Zelda, El Chavo and others will be able to work their magic and lift JAKKS Pacific higher.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.