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TORONTO — Toymaker Spin Master Corp.'s revenue and profit slipped in its latest quarter as price sensitive consumers pulled back on spending. 

The Toronto-based children's entertainment company says it earned US$141.4 million in its third quarter, compared with $135.3 million a year earlier, as its overall revenue dropped 12.7 per cent. 

Toy revenue was $552.4 million, down from $607.8 million a year earlier.

Max Rangel, Spin Master's global president and CEO, says the toy category has historically been resilient to downturns, but the inflationary environment is beginning to affect sales. 

He says the company — behind powerhouse brands like Paw Patrol, Bakugan and Hatchimals — is seeing the effects of the current economic climate and shifting customer dynamics. 

Rangel says retailers have begun to reduce orders due to higher inventory levels 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 call with analysts on Thursday. 

Spin Master updated its full-year guidance, saying it now expects toy gross product sales to increase low single digits compared with last year, rather than the low double digits previously announced.

It also expects revenue to increase low single digits compared with 2021 revenue (excluding revenue from Paw Patrol: The Movie), instead of low double digits.

Mark Segal, Spin Master's chief financial officer, said the company is operating against an "economic backdrop that has deteriorated rapidly."

"We are now expecting a more difficult fourth quarter comparison than initially forecasted, driven by lower retail orders from weakening consumer demand in the U.S. and Europe, and elevated inventory levels at retail industry wide," he told analysts.

"In 2023, we expect consumers' disposable spending power to remain under pressure due to inflation in food, housing and energy."

The toy market has deteriorated since August, with promotional investments made to reduce inventory not improving the situation, Rangel said. 

As sales dropped, retailers responded by delaying or cancelling orders altogether, he said. 

This report by The Canadian Press was first published Nov. 3, 2022.

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The Canadian Press