Share price of JAKKS Pacific Inc. JAKK plunged more than 6% in the trading session on Apr 21 as the company reported wider-than-expected loss and weaker-than-expected sales. Quarter Discussion The California-based toy maker’s loss of $1.01 per share was wider than the Zacks Consensus Estimate of a loss of 94 cents. Net loss was also significantly wider than the prior-year quarter loss of 40 cents and management’s guidance of loss of 90 cents to $1.00 per share due to increased marketing expenses in 2016 and Easter falling in the first quarter. Last year, Easter was in the second quarter. A decline in sales and fewer common shares outstanding during the quarter also led to the losses. Jakks Pacific Inc. - Earnings Surprise | FindTheBest JAKKS Pacific’s revenues declined 16.1% year over year to $95.8 million and also lagged the Zacks Consensus Estimate of $98 million by 2.2%. Net sales came within the company’s guidance range of $95.0 million to $100.0 million. The company’s revenues declined due to a drop in sales of a product line in international markets. Behind the Headline Numbers Gross margin in the quarter was 32.5%, up 150 basis points (bps) year over year, mainly due to lower product costs and lower royalties, driven by ongoing margin enhancement initiatives. Selling, general and administrative expense ratio as a percentage of net sales increased 123 bps to 47% due to higher marketing expenses. Adjusted EBITDA came in at a loss of $9.2 million, which was wider than adjusted EBITDA loss of $0.9 million in the year-ago quarter, due to higher marketing expenses as a result of an early Easter. 2016 Guidance Reiterated JAKKS Pacific expects net sales to increase approximately 7% to $800 million in 2016. Earnings per share are projected to rise around 10% to 78 cents and adjusted EBITDA is likely to increase roughly 28%. The company’s outlook reflects anticipated gross margin expansion and operating leverage, partly offset by higher marketing costs. Other Financial Update The company repurchased about 2.9 million shares for $23.0 million and $2.0 million face amount of 2020 convertible notes at a cost of $1.9 million through the end of the first quarter. At quarter end, approximately $5.0 million remained available in the current buyback authorization. Performance of Other Toymakers Among other toymakers, Hasbro Inc. HAS reported better-than-expected first-quarter 2016 results, while Mattel Inc. MAT posted a wider-than-expected loss for the first quarter of 2016. Our Take Though it suffered a loss in the just concluded quarter, cost saving initiatives would benefit JAKKS Pacific over the long term. These initiatives include the elimination of underperforming units and rightsizing businesses. Moreover, the company’s international expansion efforts have already started benefiting margins. Going forward, we remain optimistic about the company’s product launches and organic growth measures, such as securing new licenses. However, intense competition in the sector and elevated costs related to product launches remain concerns. JAKKS Pacific currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same sector is Glu Mobile, Inc. GLUU, sporting a Zacks Rank #2 (Buy). Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report JAKKS PACIFIC (JAKK): Free Stock Analysis Report HASBRO INC (HAS): Free Stock Analysis Report MATTEL INC (MAT): Free Stock Analysis Report GLU MOBILE INC (GLUU): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research