Q3 2020 JAKKS Pacific Inc Earnings Call
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Good afternoon, everyone welcome to be Jack specific third quarter earnings Conference call with management, who will review financial results for the quarter ended September Thirtyth 2020, Jocks issued its earnings press release earlier today, the earnings release and presentation slides for today's call are available on the company's website in the investor.
Sure.
On the call. This afternoon are Stephen Berman, Chairman and Chief Executive Officer, and John Campbell, Chief Financial Officer, Mr. Berman will provide an overview of the quarter along with highlights of product lines and current business trends and a discussion of the impact of COVID-19, then mr. Kim will provide detailed comments regarding Jack specifics financial and operational risk.
Mr. Berman will then return with additional comments and some closing remarks prior to opening up the call for questions. Your lines will be placed on mute for the first portion of the call. If you would like to be placed in the queue to ask a question. Please press Star then one on your telephone keypad before we begin the company would like to point out that any comments made about Jack specifics.
Future performance events or circumstances, including the estimates of sales and our adjusted EBITDA in 2020 as well as any other forward looking statements concerning 2020 and beyond are subject to safe Harbor protection under Federal Securities laws. These statements reflect the company's best judgment based on current market trends.
Conditions today and are subject to certain risk and uncertainties, which could cause actual results to differ materially from those projected in forward looking statements for details concerning these and other such risks and uncertainties you should consult Jack's most recent 10-K and 10-Q filings with the SEC as well as the company's other reports.
Subsequent we filed with the SEC from time to time.
In addition, today's comments by management will refer to non-GAAP financial measures measures such as adjusted EBITDA unless stated otherwise the most directly comparable GAAP financial metric has been reconciled to the associated non-GAAP financial measure within the company's earnings press release issued today or previously.
As a reminder, this conference is being recorded with that I would now like to turn the call over to Stephen Berman.
Thank you and good afternoon, everyone. Thank you for joining us today, considering a number of challenges we faced in the third quarter. We are pleased with our results.
We believe that there continues to be promising trends underway that leaves us very optimistic about 2021 and beyond.
We had a solid EBITDA in the quarter lifting our year to date EBITDA to 24 million up over 50% compared to last year.
We grew our margins are the highest level in three years.
Our retail Pos at top customers is up 20% year to date.
Our year to date operating income is positive for the first time since 2016.
We recently amended our term loan prepays part of it and lowering our EBITDA covenant, giving us greater flexibility.
Considering the challenges of coated and the difficult revenue comparisons.
I think our year to date results show considerable progress in our efforts to improve our cost structure and put us in a position to produce strong results in 2021.
Our net sales for the third quarter were down 14% for the results we posted a year ago, but we are encouraged by the composition of those sales and our toy segment. Our sales were down approximately 8%. This decline was mostly due to the reduction in sales of products tied to disease frozen to which we shipped heavily last year.
We are ahead of the November release of the movie there.
There were no comparable blockbuster films released in 2020.
So excluding products tied to frozen to the original frozen our toy sales were up 30% in the third quarter compared to last year.
Most of our major retail customers were able to return to normal operations in the third quarter, although many smaller retailers and specialty stores continue to see traffic and sales well below the normal levels.
This is especially true for companies that rely on Halloween season, and this is tied to the other significant factor in our sales decline.
We said after the second quarter retailers selling Halloween products were quite cautious when ordering Halloween products, leading to lower shipments to these retailers. Despite the fact that Halloween was on a Saturday, which typically give a boost to our sales.
We plan for a big decrease in sales and that's what we saw with disguise down approximately 27% and sales comparable to what we saw in terms of Pos.
There were quite a few bright spots in the quarter to Disney Princess in general did very well outside of frozen and frozen to our disease sales grew 18% compared to last year are.
Our Nintendo business was up 60% and Sonic the Hedgehog was up five fold. The extreme power dozer is off to a great start are perfectly cute baby line of product, which is exclusive we produced for one retailer more than doubled and our perfectly acute home a comparable line was up double digits.
Q girls hairstyle based on a popular Youtube channel got off to a very strong start we are encouraged with how well these new products did in the third quarter and the momentum they take into the fourth quarter and we're even more encouraged by our retail Pos and our retail inventory levels year to date through the end of September.
POS at our top three customers was up 20% and retail inventory at these retailers is down over 60%.
We are pleased with this position as we move through the holiday season, we know we have some difficult comps in Q4 against the launch of frozen too, but we're satisfied with how clean our inventory levels are at retail.
Even more encouraging than the sales trends and Pos is how much we have reduced our cost compared to last year and the year before.
John will review some of this shortly and I will talk more about that later in the call, but we have taken millions of dollars in expenses out of the cost structure such that despite the double digit reduction in sales. Our gross profit dollars were only down high single digits and our adjusted EBITDA was only down low single digits.
As we have since last year, we continued to focus on improving profitability more than just capturing sales. We are weeding out low margin products high volume, but low margin promotional programs that we ran in the past were not repeated this year.
As a result, our gross profit margins came in at the highest level of any quarter in three and a half years.
We believe our cost structure now will allow us to generate much higher levels of profitability that in the past when we see sales growth return.
So while we don't like to report sales declines, we're actually quite encouraged by how our results reflect greater sales and spending discipline and a greater focus on profits.
John will now review financials, and I'll return to discuss what we see for the rest of the year and provide a glimpse into initiatives. We are taking for 2021 John.
Thank you Steven and good afternoon, everyone.
Net sales for the 2023rd quarter were $242.3 million down, 14% compared with $280.1 million last year reported net income attributable to common stockholders for the third quarter was $32.1 million or $4.27 per diluted share compared to 16 point.
$3 million or $5.08 per diluted share in the third quarter of last year.
The third quarter of 2019 included charges related to the extinguishment of debt and changes in the fair value of our convertible senior notes totaling $13.7 million.
In the third quarter of 2020, when combining the changes in the fair value of our convertible senior notes and preferred stock derivative liability with modest expenses related to the pandemic adjustments essentially offset each other.
Excluding the impact of such charges and gains as well as stock compensation expense. Our adjusted net income attributable to common stockholders in the third quarter of 2020 was approximately $32.6 million or $4.76 per diluted share compared to $31.4 million or $5.38 per diluted share in the third quarter.
In 2019.
Adjusted EBITDA for the 2023rd quarter was $42.7 million compared to $44.1 million in the third quarter of 2019, our trailing 12 month adjusted EBITDA is $27.6 million.
Compared to last year, our girls targeted business declined in the quarter inclusive of dolls role play dress up and preschool toys and consumer products net sales were $129.3 million in Q3 down 11% compared to $145.9 million in the third quarter of last year. The big driver of the decline was the strong initial sales of merchandise related.
Frozen two in the third quarter of last year as well as products tied to the original frozen film.
Excluding frozen products sales of gross products were up over 24% compared to last year products that contributed positively we're perfectly cute baby Disney Princess cute girls hairstyles, and couldn't cat Fe, which more than offset declines in toy story, four fancy Nancy and mulatto.
Sales of action figures vehicles role play and electronics products and our boys category for the 2023rd quarter were $33.6 million up 9% compared to $30.8 million last year positive contributions from our video game related toys, including Nintendo Sonic the Hedgehog and the launch of apex legends as well as extreme.
Power dump truck and Flywheels vehicles more than offset declines in Castilla TP Blaster and last year's extreme power dozer.
Sales of seasonal products, including license ball pits and play structures were $24.4 million in the 2023rd quarter down 12% from $27.6 million in the third quarter of 2019, primarily due to declines of more for it and kids only activity tables.
The revenue downside and kids only was a result of taking a more critical view of margin and inventory management. This year as the product margin for the business was seven points higher despite the lower volume more specifically last year. We ran a special Blitz program notion that produce strong sales volume, but came at a low margin.
Broadly speaking, we are seeing strong retail sell through with our activity tables put to floor ride ons and skateboards, but have been production constrained to react given these lingering impact of the extended Chinese new year shutdowns and this unanticipated spike in consumer demand.
Sales in our Halloween segment disguise decreased 27% to $55 million in the third quarter of 2020 compared to $75.8 million last year as Steven said earlier. The decline is primarily a reflection of retailers caution in ordering Halloween merchandise and our related caution in managing accounts receivable a.
Reduced 2020 film slate also played a role.
As a reminder, we were down 38% in the segment in Q2.
Looking at sales by business segment sales and our toys consumer products segment, which includes all markets around the world were down 8% to $187.3 million compared to $204.3 million in the third quarter of last year. The decrease was driven by the same factors noted above in the product discussion.
North America toy CP were down 4% for the quarter, while EMEA Latin America, and Asia were each down over 20%.
Looking at the rest of the TNL reported gross margin of 2023rd quarter was 30.8% compared to 28.9% in the 2019 third quarter. This is the highest quarterly gross profit margin as a percentage of net sales. We have reported since the March quarter of 2017, and the highest gross margin rate for a third quarter since 2016.
Steady improvements in our product margins and lower inventory obsolescence expense outpaced higher royalty charges incurred in the quarter.
The increase in royalty expenses as a percentage of sales was driven partly by a mix shift towards products with higher royalty rates.
Significantly lower spend for SGN, a including product development, depreciation and amortization related expenses, and the 2023rd quarter totaled $37.1 million or 15.3% of net sales compared to $45.2 million or 16.1% of net sales in the third quarter of 2019.
On a year to date basis 2020, SDMA is 24.8% of net sales compared to 26.9% and 2019, despite net sales being $58.5 million lower year to date compared to prior year.
Our net interest expense in Q3 of this year was $5.6 million compared to $4.6 million last year, reflecting a full quarters portion of our recapitalized balance sheet compared to prior year.
Net cash provided by operating activities was $27.8 million for the third quarter of 2020 compared to $35 million in the third quarter of 2019 free.
Free cash flow was a positive $26 million in the 2023rd quarter compared to $32.6 million in the 2019 third quarter.
As of September Thirtyth, 2020, our cash and cash equivalents, including restricted cash totaled $79.8 million compared to $66.3 million at the end of 2019 and $75.9 million as of September Thirtyth 2019 accounts receivable as of September Thirtyth 2020 were 166.
Point $8 million up from $117.9 million as of December 30, Onest 2019, and down from $200.8 million at September Thirtyth 2019.
Dsos for the 2023rd quarter decreased to 63 days from 66 days reported in the 2019 third quarter.
Inventory as of September Thirtyth, 2020 was $54.6 million versus $54.3 million at December 30, Onest 2019, and $65.3 million as of September Thirtyth 2019.
The size and the 2023rd quarter were 30 days compared to 40 days in the 2019 third quarter and looking at the size on a trailing 12 month basis. We were at 63 days for 2020 and 73 days for 2019.
By the end of the third quarter. The company had exhausted the $6.2 million in funds received under the Paycheck Protection program. We spent $8.3 million in eligible forgivable expense through September 17th 2020 remains the company's intention to file for forgiveness of this loan.
And the absence of knowing where there any funds will be forgiven and how the program may change as the year continues the company has taken a conservative approach and presumably to your loan period with interest beginning to accrue in June 2020 as.
As a result, we now reflect $2.5 million in short term and $3.7 million in long term debt on our balance sheet related to this loan.
As a result of September Thirtyth 2020, the company's debt at face value included the aforementioned $6.2 million BPP loan due June 2000, $20 million to $30.6 million of refi capitalize convertible senior notes due July 2023, and $138.8 million owed under our term loan due February 20.
23, both inclusive of Pik interest.
We currently have no outstanding balance under our credit facility aside from $10.4 million in letters of credit as of September Thirtyth.
During the Q3 quarter $1.0 million of the July 2023 convertible senior notes were converted to common shares at $5.65 per share subsequent to September 30, an additional $2.0 million of the aforementioned notes were converted to common shares at the same price.
As of October 30, Onest 2020, the face value of the July 2023 convertible notes is $28.7 million, including accumulated pik interest.
Also subsequent to September 30, the company reached an agreement with its term loan noteholders and wells Fargo to amend the company's existing lending agreements. The details of these amendments were filed as an 8-K on October 19th.
Among other attributes it required a term loan principal paydown of $15 million upon execution as well as contemplating an additional $5 million prepayment in the next 12 months subject to certain conditions.
As a result, the company has classified $20 million of its term loan debt as a current liability and therefore, the company's revised balances of its 2023 term loan will be $20 million in short term debt and $118.8 million in long term debt both inclusive of Pik interest.
The $15 million principal payment was made in October.
Capital expenditures during the third quarter of 2020 were $1.8 million compared to $2.4 million in the third quarter of 2019.
The diluted income per share calculations for the third quarter 2020 with based on a weighted average of 6.96 million common diluted shares outstanding up from $6.04 million in the third quarter of 2019.
This number reflects the impact of a reverse stock split in July 2020, as well as the aforementioned convertible senior note conversions.
And with that I will now hand, the call back over to Steven for some additional remarks.
Thank you John.
One of the most significant benefits and competitive advantages Jack has created over the past 25 years, which has proven successful in this current environment is that many evergreen categories and business units we have created.
These product lines feature basic time tested play patterns and have proven to be steady sellers for jacks, whether we are in normal times or in an environment as disruptive as we have seen in 2020.
They are not dependent on hot movie properties, Although we will always be opportunistic with such properties.
Examples of these evergreens include our seasonal products, such as Moose mountain with its everyday play pattern, such as children's ride ons and a broad array of sizes and licenses.
Play environments, such as ball pits and pop up tents with all the appropriate evergreen licenses.
Reduce skateboards, which is building rapidly now and we expect we will continue to grow going forward and a brand new segment, we will be launching next spring, which consist of license skateboard and license Trampolines, that's adding to this division's growth and expansion.
We believe disguise will have a solid 2021 with an ample line of new licenses, we have been pursuing throughout this year, coupled with the amazing cast of characters from our deep portfolio of licenses from major Entertainment partners gaming licenses and licenses from our friendly competitors.
In addition, Halloween lands on a Sunday, which usually gives the industry a lift compared to when Halloween lands on a weekday.
Our boys Division has a stable line of evergreen licenses and proven categories, which continually outperform our internal expectations, including our line of Nintendo action figures collectibles and Playsets, It's a me Mario and our Super Mario RC, we have a deep offering of Sonic.
The Hedgehog action figures in toys.
And our new line of apex legends action figures in place that launched this third quarter.
When combined with the evergreen role play product lines, such as Black and Decker kids products.
These video game licenses applied to toys with classic play patterns form a strong and stable base from which we can grow.
Our girls Division includes the prominent Disney characters that are everlasting in the minds of children and parents.
Even at a deep product line of girls role play and assess raise.
Preschool toys and dollars to name a few.
Within this range, we can develop new and innovative products such as a newly created line called print this style collection the.
The steady sales of these products coupled with toys based on movie launches such as Rad. The last Dragon next year, and others give us a stable and solid business. In addition to opportunities for upside.
This is just to briefly highlight the evergreen business, which we have developed and built and we have proven strong sell through at retail retailers like these products because they represent lower risk as they know that they offer kids and parents the right products at the right time.
The toy industry. This year has been a bit like a tale of two cities all year consumer demand for certain toys has been fueled by the need for kids and families to stay at home and by the cancellation of sports After school activities movies birthday parties and visits with grandparents.
Categories, such as games puzzles and activity toys have done well, while other carries more dependent on new licenses or traditional gift, giving occasions have not done as well some retailers have seen a surgeon toy sales, while others have struggled outdoor products and products related to video games have sold solid through the year, but.
Im seasonal products like Halloween merchandise has been hit a little bit harder.
Jackson's use this time to focus on what we do best and what we can do better while disguise Halloween products and frozen products were down we have seen some of our basic core product sell quite well and our Pos all year has been very strong.
We have expectations at some of our grilled product lines will do well and will benefit us this year to other products in the Disney Princess Dow collection are performing well one is our gourmet smart kitchen set and as far as the lineup style Vanity both are proven play patterns and benefit from being part of the strong disease sub segment.
Even though down from last year frozen to continue to be a big contributor and for the holidays, we expect our animatronic magic in motion Elsa doll, and our Playdate Elsa and played eight nuc water horse to sell very well cafe, which is based on our own internal IP is selling extreme.
Really well and cute girls hairstyle based on a popular influencer has gotten good reception.
And our boys Division, we have several strong launches in addition to the strong evergreen base of business of some of our existing strong brands. Our toys based on video games continues sales extremely well, especially sonic the hedgehog, but also Nintendo for the holiday season, we will be launching its a mean Mario and overseas.
Nice feature action figure with integrated voices in sound.
This is the first time in history, then tend to show that a talking Mario toy has been introduced in the market.
During the third quarter, we launched apex legends based on a highly successful battle Royale video game from electronic Arts.
We have broad rights for apex alleges toys and as the game continues to do well, we expect the toys to follow.
Also in boys, we have followed last year's extreme power dozer, which is extremely well with this year's extreme power dump truck featuring a powerful drive mechanism that allows kids to haul push and pull just about anything.
Our redo line of Skateboards continues to grow and we expect to have a good holiday season at many new retailers, including some that represent new distribution channels for us. These.
These are just some of the products that we expect to do well this holiday season.
Now I'd like to turn to the efforts that we are taking to make the improvements to our cost structure more permanent.
What we are doing goes far beyond reducing payroll or squeezing a little more out of our vendors.
We have been working with an outside firm to do a complete review of our business and extreme detail from sourcing to shipping. We began this work at the start of this year prior to co hvid and have continually been working all year long and have made tremendous progress.
As manufacturing and retail platforms, our ever changing we believe taking the knowledge and expertise in this area of cost reduction and process improvements will enhance our margins commencing late next year and through 2022 and beyond.
You have heard us talk about this before but this year, we accelerated our efforts to increase the portion of our international sales that are made direct to retailers rather than through a distributor. We made significant progress on this in 2020 and getting to 100% direct distribution in Italy, Spain and Mexico.
We should see the full year benefit of that in 2021 as well as additional progress.
In 2021, we expect to see significant improvements in design manufacturing forecasting shipping warehouse in end marketing.
The improvement will show up as lower costs and faster execution, both of which will produce benefits for shareholders. We feel like we have gotten to the point, where we can have a company that is profitable just with a core evergreen line of products and can flow much more of the benefits of incremental sales increases to the bottom line.
2020 has been a year of unprecedented challenges in so many ways to people all around the world. We have all had to change the way, we do things adopt new routines and habits just to survive even if corona virus disappears in months. Some of these changes will endure.
The acceleration towards more online shopping or curbside pickup is not likely to reverse itself.
Work from home and distance learning and we will continue to be a much bigger part of our lives than before because we have seen what is possible. The entertainment business has been altered business travel will likely remain suppressed.
It may never fully recovered to their previous levels. So the future will look different.
What is consistent though is that Jack's we will continue to focus on making basic evergreen toys and kids products with proven appeal and proven play patterns selling them through our strong retail networks around the globe and keeping our operational costs lower as we prepare for when the efforts of the pandemic are reduced and more.
Our latest prosper and whatever is the new normal.
In 2021, we see stronger sales in some of the categories that got eclipse in 2020.
We see some of the entertainment properties that have been planned for 2020, getting released and doing well and multiple formats not just physical theaters, we see greater opportunities for digital content and physical products based on that content.
We see our strongest retail partners being even stronger next year, and we see jaques, having a cost structure that can optimize the lift in sales we expect.
In closing I want to thank our incredible team for all their hard work in a challenging environment. We have today, we will continue to take the steps needed to position the company for profitability growth and we couldn't do it without the dedicated team.
With that we will now open up the call for questions. Thank you.
Thank you as a reminder to asking question you'll need to press star one on your telephone two in chartered question press the balance sheet. Please stand by we compile the junior roster.
Our first question comes from Steph Wissink with Jefferies. You May proceed with your question.
Thank you good afternoon, everyone.
Unpack.
Well not unpack your enthusiasm around the underlying business I think you talked a little bit about the business improving month to month in the quarter, certainly very strong Pos number that you're taught me Taylor and it give us some sense of what you've been observing in that channel.
And then what you're seeing already holiday season to date given that it had an earlier this year than prior year.
Thanks, Stephanie Hope Oswald healthy for you and your family.
The things that we've seen as you primarily know a lot of our business more than half our business is fob.
This platform both in North America and globally. So what we've done is we've had our earlier shipments based on a lot of it being done Fob. So we've had early placement and early set dates with retailers and what we've seen from that is the core categories in which we are and some of it being a good fortune that we develop and we acquired.
Over the years some of it we expanded on our own have really performed or outperform kind of the normal expectations. It's the normal basic play patterns and we're in pretty much the right categories and the Rite aid grade for kids, so from our seasonal business with the flip the floors. The ride ons the play environment the skateboards.
Go from preschool to kids and tween that always through our Disney Group for Halloween Group and our growth group. We are just in the correct categories. The right play patterns the right price point.
And with the right retail channels and really a diverse retail channel base from the mass retailers to our secondary retailers like the TJ mask cost goes the rock storage and then to the dollar trade. So were out at every retail trade almost every retail price point, that's applicable and it just bodes extremely well for us in this environment.
And we took a lot of the risk off the table early on with trying to launch new.
Our owned IP, such as like create good color. This year, what takes a lot of heavy marketing dollars to go behind we decided to take a real basic play pattern and strong content thats known around for kids and adults, which really has outperformed.
Outperformed our expectations and from there we decided early on to start expanding in those categories for next year. So it really just it was a mix of good timing good planning and just as a strong consumer base.
I think when we talk into 2021 Alpha sense, yes, some degree of enthusiasm around your prospects for next year and stronger core stronger licensing slate, but also sounds like an opportunity to elevate the core or someone else.
Pattern, but talk about that as well.
Yes, and thank you for that question that we're really excited I'm personally excited about it that our basic seasonal business that I just mentioned about the play environments that ride ons that play tests, we have a tremendous amount of licenses that are new and with our current fresh appropriate licenses. In addition to our reduced skateboards, which are just a really cool great category.
It's in the math, we've acquired a tremendous amount of strong licenses to do a licensed segmentation, which will be new for 21. We also entered in which was a category that did exceptionally well this year, which were indoor trampolines and.
Like non licensed Trampolines that retailer, we took over the appropriate licenses from the top licensing companies to build that trampoline base, which will be all new areas of business for us and 21 same goes into our boys category from the Sonic and tend to apex, we have several new licenses and areas of business so without.
Any real new movies, we look at our categories doing strong and our Disney group has expanded their their Disney Classic Princess business, which has grown for US. This year Art Art style collection has expansion not just in SK used but in retail base. We also have picked up amongst all these different segmentations.
International licenses and as I mentioned earlier, we are direct down on Spain, and Mexico in Italy, So we'll be able to actually not just have the increase in our dollars cutting out the third party distributor, we will have a very deep line of product, which we need to fulfill these avenues of distribution. So we have the now distribution and we're now we're filling.
Net with product and it goes same goes for the skies. We had eight at we said early on Halloween based off of what we saw in.
Back to school and an Easter was down tremendously we knew that was going to happen with Halloween, but we've picked up a tremendous amount of new licenses international licenses, we have the Hasbro rights for both North America and U.S., we have Lego we have minecraft, we have more them or we have Microsoft that we just mentioned early on plus several that we.
Have not now shed so just our basic business, adding some of these new licenses and new distribution, we will see a strong increase of visits. In addition, there are some new life new movie licenses as rail which comes out I believe in in February or March, which we have a large toy license for.
In addition to a new movie launch in November of a new animated film that we have the rights to that we'll be talking more about next year. So we see next year has been a strong solid year for us as a company.
Thanks, John just one for you very quickly I think you mentioned in the quarter that loyalty expense went up and the explanation why.
Products at higher margin higher royalty rate excuse me. So can you help us just think looked absolutely for royalties and I'm 2021 row piece it sounds like even at that point in time on the licensing opportunity.
Yeah, I think in terms of high Steph in terms of thinking about Q4, I think you know the business that we're shipping in Q3, three will be somewhat comparable to Q4, obviously.
Not at the same level of Halloween business, but on the toy side, it's pretty consistent product line of pretty consistent math. There I think looking ahead to next year.
You know to Steven's point.
That number could could mix down to a somewhat different place, but it is probably kind of premature to say.
As pointed out we've got a lot of new licenses coming into the mix.
And as you can imagine it sort of becomes a big weighted average exercise.
But.
It is the case, obviously the numbers been been a pretty high one for us this year.
Thank you.
Sure.
Thank you and as a reminder to ask a question you will need to press star one on your telephone. Our next question comes from Gerrick Johnson with BMO capital markets. You May proceed with your question.
Thank you good afternoon guys.
Okay.
Hi, Steven.
So can.
Can you talk a little bit about supply chain, it's been an issue for a lot of companies I cover whether that big small or whatever they make.
Things are clogged a little bit are you seeing any issues not so much so much product coming out of China, but product getting to where it needs to go.
And in the countries that you're you're operating in.
What we seen for say hope you and your family or well, what we've seen with supply chains, It's really just been with Lockdowns and throughout color, both North American and Europe. So when we had the early locked out in spring from Smith.
Two you know toys R us and Canada to Walmart just only taking the essentials, we've seen the disruption there I Wouldnt game stop wasn't able to ship pair a call at the Roth and TJ Max but that was really the first half of this that we just saw just delays in shipments and for us because we we really planned on the EPS will be side of the business, we had a really maneuvered.
Our focus when we started with.
Covered really knowing how the impact is going to be pretty aggressive around the world. We really manage the manufacturing process of this and the retail inventory across the board. So we.
We didn't want to be stuck with inventory on our balance sheet, nor do we want to have inventory at retail stuck. So we really worked with our retailers our suppliers overseas to manage that process and it did show I don't have the numbers in front of me that.
Our retail inventory was down over 16%, our approximate and about approximately the same number on our balance sheet. So I I believe just because of the categories were in and we really cut early on the Halloween segmentation, knowing that it was going to be a difficult time for Halloween and managed it and we saw this morning that our sell throughs on the hot.
Moving side of business based off our the reductions we worked with with the retailers was pretty spot on so we look.
If this Halloween, even though down we were successful in the choices. We made on the the licenses the amount of SK use we brought in what's it bodes extremely walks were in the midst right now of selling Halloween 21.
So what we did there was correct and what we see what we did with the normal retail channels.
We've managed it well, what's what's done well our call the ones that have both components brick and mortar and online sales are doing extremely well. So the inventory levels have been the lowest and the other ones like the dollar trade does it really do a lot of online sales, but they have very good they've had to get very good penetration with consumers coming then so so far for us we don't see any.
Heavy.
Issues with inventory or any issues with the managing getting the distribution out.
Okay. So so your supply lines are operating well your warehouses are good things of that nature and products getting to where it needs to be so your inventories down 16% and at approximately yes.
Now so.
Would that mean that you're not getting the product to to to the shelves like can you two should your inventory to be down 60% of retail.
That's what I'm trying to get at it.
So what we did do it right now right now the inventories should be where we want to get it down even lower what were focusing on and all of the areas of business 'cause for say inventories as cash we'd rather be more flu with cash my goal is to reduce our debt and move forward with helpful.
In the future acquisitions, but we scaled black back certain things based off of when we saw kobin pick up so some of the black Friday or initiatives that we normally would do that would be very heavy in the fall, we curtailed them back and some of that's why you see frozen to being down a little bit we actually is curtailed some of these big and.
This a lot just to scale back that black Friday, because consumers. We don't believe are becoming in the same way and the way Black Friday as it's a you know you get people then you bring out the right price points big values and this world was just very.
An easy so we just decided to take a just a much more focused approach in each of our categories, which we knew that we would get a little bit less than sales, but at the same time, we rather have much more profitable sales and grow our profitability. So when you look at what we've done this year. We've we've created our business to be strong at healthier and cleaner that means going into 2021, we should have a.
Very nice 2020, and 2021, we just see stronger growth for us just in our basic business and anything new that we do so it was a planned approach on what we did amongst all of our divisions and they had those initiatives that they had to focus on both us and around the world.
Okay that sounds good sounds prudent.
Are you concerned about concerned at all about the pantry loading you had very strong year so far.
If there's any sort of pull forward at all.
[noise] patch no.
And toys, and we don't see that it's a good catch what we I have not seen that yet to date. This is may not having any more knowledge outside of when I look at our orders when they come in dailies and our sell throughs, we haven't seen like big Big chunks of sales happen like beyond what the norm is we do see it early on we see a lot more sales happening now.
But we I don't see I and our toy area right now.
I don't see that grabbing go mentality, but when you look at the UK shutting down this week France.
And.
Finally in Spain, you may see that a different areas, but as of now I have not seen that.
Okay. Thank you Stephen.
Thank you Gary.
Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Stephen Berman for any further remarks.
Thank you operator, and thank you all for joining US today, we wish everyone health and safety for all and we look forward to updating you in February when we report our fourth quarter results and year end results. Thank you and all the best.
Thank you ladies and gentlemen, this concludes today's conference call. Thanks for participating you may now disconnect.
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