Spin Master CEO Max Rangel, in Toronto, on Oct. 11, 2023.Chris Young/The Canadian Press
Spin Master Corp.’s TOY-T chief executive officer says he has an eye on “numerous points of volatility” the toy maker could face this year.
Max Rangel said Tuesday the Toronto-based company stands to be impacted by 10-per-cent tariffs U.S. President Donald Trump has levied on goods entering his country from China.
Spin Master, which is behind the Hatchimals, Gabby’s Dollhouse and Monster Jam brands, may also be hindered by consumers being more cautious with spending.
“Value will be an important driver for consumers in 2025 as they continue to experience pressure on discretionary spending,” Mr. Rangel said on a call with analysts.
To deal with both challenges, Spin Master is reviewing its supply chain options “carefully” and considering pricing changes.
Those moves come as Canada has been plunged into uncertainty by Mr. Trump, who has promised to apply duties to Canadian goods next month.
The duties are expected to increase the cost of business for Canadian companies but the mere threat of them has already driven consumers in the country to support homegrown brands.
Because the situation is so “fluid,” Spin Master chief financial officer Mark Segal said the company doesn’t plan to share more on how it will be impacted until it releases its next quarter’s financial results at the end of April.
Results for its most recent quarter were released Monday and showed the company saw a profit of US$21.1-million, up from a loss of US$30.1-million a year earlier.
Its revenue totalled US$649.1-million, up from US$502.6-million during the fourth quarter of 2023.
Such numbers caused Spin Master’s share price to sink almost 10 per cent Tuesday afternoon to $28.24.
The quarter that weighed on the stock spanned the busy holiday season, when toy sales tend to spike, but this year brought challenges.
Once the Black Friday period dissipated, “lower-than-expected consumption cropped up,” said Mr. Rangel.
“The consumer was really price sensitive and deal seeking in the fourth quarter,” he said.
“When a lot of those deals dropped in October, people flocked to those deals … and that basically prevented them from going back and buying more later in the quarter.”
The company also saw struggles in its digital games division, where Mr. Rangel said the market is “competitive” and creating new titles at scale is “challenging.”
The company developed a new Rubik’s Match 3 game but found the cost to acquire new users weighed on revenue so much that Spin Master made the “difficult decision” to wind down a studio and cut some staff.
The closing Nordlight Games studio in Sweden was purchased by Spin Master in 2022, following a minority investment it made a year earlier.
Spin Master spokesperson Tammy Smitham did not provide the number of staff affected by the closure but said in an e-mail that the group of people laid off was “small” and in Sweden.
Executives have said some of the Nordlight Games employees will be moved to work on its Piknik and Toca Boca games.
The Nordlight Games closure also pushed the company to take impairments of US$2.9-million for goodwill, on top of US$5.5-million on intangible assets linked to Rubik’s Match.
Despite the troubles, Stifel managing director Martin Landry pointed out revenues from Spin Master’s digital games segment increased 14 per cent year-over-year, an improvement after three straight quarters of year-over-year declines.
Looking more broadly at the company’s quarter, he told investors in a note that Spin Master’s results were below expectations and missed the company’s own revenue guidance.
However, Mr. Landry said year-over-year comparisons were more difficult because the business had success with its release of a Paw Patrol movie the year before.
Spin Master, which recently started selling a value line of Paw Patrol toys, plans to release a third movie featuring the rescue pups in July, 2026, as well as new seasons of the Paw Patrol TV show and its Rubble & Crew spinoff.
Development is also under way on a live-action film about Bakugan – an anime property whose toys Spin Master sells – and there are global theatrical releases coming for Superman, How to Train Your Dragon and Jurassic World, which are all brands Spin Master makes licensed products for.
“We’re kind of at a bit of an inflection point in the cycle of entertainment,” Mr. Segal said.
Because production timelines in film and TV are so long, Spin Master expects 2025 to be “a down year” for entertainment.
“We were kind of ending off one cycle and then starting off again a new cycle which is going to drive growth in entertainment over the next four to five years,” Mr. Segal said.