TORONTO — Toy maker Spin Master Corp. recorded a drop in revenue in its latest quarter after stores ordered inventory early to avoid supply shortages and high inflation took a toll on demand later in the year.
Spin Master CEO and global president Max Rangel said Tuesday the company had an “exceptionally strong” first half of 2022 driven in part by retailers bringing in toys earlier in the year than normal to minimize anticipated supply chain disruptions going into the fall.
But toy revenue for the company — behind brands like Paw Patrol, Bakugan and Hatchimals — in the second half of 2022 was pressured by “changes in the macroeconomic environment,” he said in a statement.
Higher inflation compounded by foreign exchange volatility and a carry-over of inventory at retail from the first half of 2022 put particular pressure on Spin Master’s toy revenue, Rangel added.
The company’s preliminary fourth-quarter revenue totalled US$465.8 million, down from US$620.5 million a year earlier.
The toy company, which keeps its books in U.S. dollars, said toy revenue for the quarter totalled US$396.7 million, down from US$542.0 million, while entertainment revenue amounted to US$31.2 million, up from US$28.5 million. Digital games revenue for the quarter came in at US$37.9 million, down from US$50.0 million.
Spin Master said constant currency revenue for the quarter was down 22.0 per cent compared with the fourth quarter of 2021.
In November, Rangel told analysts that retailers were reducing orders due to higher inventory levels on shelves industry wide.
“We have seen an impact on point-of-sale trends in the category as the year has progressed, and the average consumer becomes increasingly price sensitive,” he said during a conference call.
For its full year, the company said revenue totalled US$2.02 billion, down from US$2.04 billion in 2021 as toy revenue amounted to US$1.74 billion, up from US$1.73 billion a year earlier. Entertainment revenue for the year totalled US$118.8 million, down from US$135.8 million in 2021 when Paw Patrol: The Movie was released while digital games revenue for 2022 totalled US$163.9 million, down from US$174.8 million.
On a constant currency basis, Spin Master said its revenue for 2022 was up 1.4 per cent from the previous year. Excluding the Paw Patrol movie distribution revenue in 2021, constant currency revenue was up 2.7 per cent.
Spin Master is expected to report its full financial results after the close of markets on March 8.
This report by The Canadian Press was first published Feb. 7, 2023.
Companies in this story: (TSX:TOY)
