EARNINGS SEASON TOYING WITH THE MARKET JAKKS' Q1 NUMBERS MISS MARK.

Byline: Brent Hopkins Staff Writer

MALIBU - Jakks Pacific Inc. missed first-quarter earnings expectations by 20 percent on Tuesday, angering investors and analysts and spurring a morning sell-off.

The toy maker reported sales of $67.8 million, up from $59.9 million a year before. Jakks earned $6 million, 24 cents per share, up from $2.2 million, 11 cents per share a year ago. The 24 cents fell six cents shy of analysts' expectations. Surprised investors pushed shares down as much as 10 percent early in the day, though the stock later rallied somewhat to close at $12.20, down 6.15 percent.

``It was not a good quarter by any stretch, and I don't expect a good first half,'' said Bret Jordan, managing director of Boston-based brokerage Advest Inc. ``This puts it all on the second half, since they certainly didn't shoot any lights out this time. I think they can make it, though.''

The firm reiterated its sales and earnings growth target of 10 percent for the year, hoping that it will be able to phase out underperforming lines taken on in the Trendmasters acquisition last year. Higher-margin back-to-school products could also pitch in to the bottom line, reversing fortunes heading into the crucial fourth quarter.

``All in all, we're quite pleased,'' said Joel Bennett, Jakks' executive vice president and chief financial officer. ``The gross margins were down a little because of the profit mix. We inherited deals with the Trendmaster acquisition, and they had low margins.''

Analysts, however, were less than pleased, assailing Jakks' closemouthed policy on discussing specifics of growth. While the firm cited some products, such as its perpetually strong WWE wrestling figures, SpongeBob SquarePants toys and newly introduced Dragon Ball Z line, it would not disclose specific segment numbers.

``This company's management team is rather reluctant to provide decent discussion,'' said Corey Benjamin, an associate with Bear Stearns. ``It's difficult to say which is performing and what's not. ... It's a company that has an acquisition-driven growth model, and it's frustrating for analysts and investors who want to know how organic growth is shaping up.''

Jakks may have good reason for not wanting to bring up that growth, said Bob DeLean, a senior analyst with Memphis-based brokerage Morgan Keegan & Co. By his research, there may be no organic growth to speak of.

``One of the problems investors have is that management isn't real forthcoming,'' he said. ``I think it's been negative for the last four or five quarters. If they didn't do acquisitions, they'd be losing money. They know what they made, but they won't break it out. They say they don't want to do it because the competition's listening, but to me, it appears many of the brands are slowly declining, an 8 to 10 percent decline in core business.''

Bennett defended the firm's disclosure, saying the confusion of the overall retail sector made it too difficult to pin down the specifics Wall Street craves.

``Historically, we had more open discussion with analysts,'' he said. ``But because of the retail environment ... it's difficult to be that accurate. We're less concerned whether things hit in June or July, but rather than they hit by the end of the year.''

Though most stock watchers took a chillier tone, Arvind Bhatia of Southwest Securities agreed with Bennett's assessment.

``The March quarter was a little disappointing, but it's a tough environment,'' said Bhatia, an equity analyst with the Dallas-based brokerage. ``In light of that, they're not doing too bad. The company's reiterating its guidance and talking about improving margins, and that 10 percent earnings per share growth would be pretty good.''

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2 photos, chart

Photo:

(1 -- 2 -- color) The Rock, a favorite of fans of the WWE, is part of the Unlimited Assortment on toy shelves from Jakks. This piece in the long line of SpongeBob SquarePants toys is Swap 'N Bop SpongeBob.

Chart:

STOCK PINNED

SOURCE: Company reports

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