Spin Master: Preliminary Fourth-Quarter Sales Results in Line With Expectations

No-moat Spin Master offered insight into its holiday season results that were largely in line with our fourth-quarter outlook. Total sales growth of $503 million, up 8%, were a touch below our $513 million estimate, but were lapping a weak 25% decline last year. Entertainment revenue fared the best, up 77%, and benefited from the delivery of new content (for example, Unicorn Academy, Vida the Vet) and Paw Patrol film distribution. On the toy side, wheels excelled, up 26% on Hexbug and Monster Jam demand. Performance on the gross margin or operating expense lines was not offered in the initial take on the quarter, but an unchanged EBITDA outlook—up slightly from 19.2% in 2022 excluding Paw Patrol distribution revenue—implies there should be little surprise when the firm reports its full results on Feb. 28. As such, we plan no change today to our CAD 49 fair value estimate and view shares as very undervalued, trading at a roughly 30% discount.