Spin Master caught in political tumble
Toy maker grappling with disruptions from U.S.-China trade dispute
Toronto-based Spin Master Corp. say it is grappling with several layers of disruption caused by the trade dispute between the U.S. and China.
Benoit Gadbois, president of the toy company, said Wednesday that Spin Master has had to shift production, shipping schedules, warehousing and deal with changing demands from buyers as uncertainty continues on tariffs between the world’s two largest economies. He said changing rules about which items were subjected to tariffs “was disruptive to ours and the industry’s supply chain.”
The company said it was forced to rush in shipments from China to the U.S. to get them in before another round of tariffs, which put pressure on its supply chain and drove freight costs higher. It also found that warehouses for some of its retail customers were filling up while they tried to bring in inventory to avoid tariffs.
The logistics crunch in the third quarter, which helped push about $40 million (U.S.) in shipments to the fourth quarter, came as the company also works toward a wider diversification push outside of China. The disruptions knocked down its adjusted net income to $93.2 million, or 90 cents per share, lower than the $129 million or $1.23 per share analysts were expecting, according to financial markets data firm Refinitiv.
Gadbois said the company expects to have less than half of its sourcing come from China by the end of next year, down from 70 per cent two years ago and more than 90 per cent when it went public in 2015.
“Our diversification program out of China accelerated this year due to the U.S.-China tariff dispute,” Gadbois said.
The trade disruptions are part of wider pressures Spin Master faces as the retail landscape continues to evolve rapidly. The company says it has also had to restructure its warehousing strategy to respond to more online orders that require just-intime shipping, while it is also moving more into direct marketing to customers.