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Spin Master on a roll with rising toy sales, digital revenues ahead of movie release

A person is silhouetted at the Spin Master toy and entertainment company in Toronto on Tuesday, January 29, 2019. THE CANADIAN PRESS/Nathan Denette
August 05, 2021 - 12:45 PM

You could say Spin Master Corp. is on a roll.

The Canadian toymaker and children's entertainment powerhouse behind the popular animated television series Paw Patrol marked its second consecutive quarter of increasing profitability on Thursday and showed no signs of slowing down in the second half of 2021.

The Toronto-based company's first feature film — Paw Patrol: The Movie — is set to be released in theatres later this month.

With it comes an extensive global marketing campaign, hundreds of consumer goods partners leveraging the Paw Patrol brand and an anticipated lift in sales of toys related to Ryder and his team of pups.

Spin Master global president and CEO Max Rangel said the company has stepped up its product prices to address higher costs.

The price increases "provide a partial offset to the sharply rising input and ocean freight costs that we are seeing," he told analysts on a conference call.

The escalating cost of goods is being felt across the toy industry, Spin Master's chief financial officer Mark Segal said.

"We continue to see increases in input costs, primarily from plastic resin, paper and cardboard packaging and more recently from electronic chips," Segal said during the call.

Shipping costs have also emerged as a concern, Segal said, noting that ocean freight has nearly doubled as a percentage of the company's cost of goods sold compared to prior years.

"These cost increases accelerated significantly in the latter part of (the second quarter)," he added.

Rangel said the company is also seeing "logistics disruption" driven by congestion in key ports, as well as rising COVID-19 infections in some parts of Asia.

Still, Spin Master is confident it will have its toys on store shelves ahead of the busy back-to-school and holiday shopping seasons.

Some retailers already have the company's fall line up of products on display or featured on end caps, while in other cases the toys have arrived in local warehouses and are making their way to retail shelves, Rangel said.

"Everyone's really working hard to get them to you," he said in response to an analyst's remark about being unable to find Paw Patrol: The Movie-themed toys during a recent visit to a large retailer in Canada this month.

The company said its second quarter net income was US$33.5 million or 32 cents per diluted share compared to a net loss of US$14.9 million or a loss of 15 cents per diluted share a year earlier.

The company, which reports in U.S. dollars, said it recorded a total revenue of $390.8 million in the three months ended June 30, a 39 per cent jump over the $281.1 million recorded during the same period of 2020.

Spin Master said its higher sales were driven by its preschool and girls category, which includes toys for children aged two to five and the brands Hatchimals and Present Pets, as well as its boys categories, which has its own brands like Bakugan, Air Hogs and Tech Deck and licenses such as DC, Monster Jam, Supercross and League of Legends.

The company also reported a strong increase in digital games revenue, driven by growth in Toca Life World and the Sago Mini subscription user base.

"Kids are spending more time socializing with their friends in these expansive digital playgrounds through the new content releases and tools that allow them to create connect and share," Rangel said. "Toca Life World has seen explosive growth in consumer engagement."

This report by The Canadian Press was first published Aug. 5, 2021.

Companies in this story: (TSX:TOY)

News from © The Canadian Press, 2021
The Canadian Press

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