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TORONTO — Spin Master Corp. executives say the lead-up to the usually bustling holiday sales season has so far wound up below expectations.

Across the toy industry, October store sales have been "disappointing" and "well below retailers' plans," said Mark Segal, chief financial officer at the Toronto-based toy manufacturer.

"Consumers are under pressure and whilst consumer spend remains high overall, consumers are allocating their spend to travel and experiences," he said on a Thursday call with analysts.

Segal's observations about the market come as Spin Master gears up for its typically busiest season of the year. The company's Paw Patrol, Bakugan, Hatchimals, Rubik’s Cube and Gund toys often take top spots on wish lists, generating higher sales and revenues than other times of year.

However, this shopping season has come with stubbornly high inflation, making consumers think twice about purchases or hunt for deals more than they may have before prices rose.

Spin Master is watching these conditions closely.

"We expect consumers to purchase very late in the season, which will reduce our replenishment potential," said Max Rangel, Spin Master's chief executive, on the same call as Segal.

Responding to this trend, Segal has noticed retailers have taken on a "more conservative" approach to placing orders. Since mid-October, they've been reducing their orders slated for November and December delivery to prevent potential overstocking.

As a result, the company announced Wednesday that it had cut its guidance for sales and revenue for the full financial year.

At the same time, it shared that its net income for the third quarter was US$155.4 million, up from US$141.4 million from a year earlier. 

Revenue for the period ended Sept. 30 was US$710.2 million, up from US$624 million.

Excluding its new Paw Patrol movie, which came out at the end of September, the company said revenue was US$694.6 million. 

"PAW Patrol: The Mighty Movie" is a film based on its hit television show and line of toys detailing the adventures of a crew of search and rescue dogs.

Weeks after its debut, Spin Master announced it would shell out $950 million for Melissa & Doug, a Wilton, Conn.-based company known for its wooden and sustainable toys.

The deal adds more nostalgic toys that foster pretend-play for preschoolers to Spin Master's roster. Some industry watchers feel the add could cater to parents seeking more simple, non-digital playthings.

"This is a strategically compelling acquisition, the largest in our history and has the potential to accelerate our long term growth and strengthen our relationship with parents in the earliest years of their child's life," Rangel said.

He was equally enthusiastic about a recent global toy licence agreement Spin Master signed for the new reboot of the Dora the Explorer franchise coming next year.

The new Dora toy collection is expected to launch in the fall of 2024 and include figures, dolls, playsets, vehicles, plush, role-play, games and puzzles, inspired by Dora, her monkey companion Boots and other characters.

This report by The Canadian Press was first published Nov. 2, 2023.

Companies in this story: (TSX:TOY)

Tara Deschamps, The Canadian Press