Offsetting weaker domestic sales with increased overseas shipment volumes

「Overseas sales and royalty income 89,196 56,628 63.5」

「Overseas sales and royalty income 220,382 167,718 76.1」

「For overseas sales, following a change in the contract with the seller of Magna-Tiles for the US market, the business changed from the current period to royalty income on sets for which the Company owns the IP, resulting in a substantial decline in sales compared with periods through the previous fiscal year.」

「As a result, US sales declined by more than 30% year on year, and full-year overseas sales revenue was ¥3,211 million.」

「As shipments in the previous fiscal year were unusually high, sales for the current period also declined significantly year on year.」

「In export sales of Magna-Tiles to the United States, moderately priced sets became the main orders while the series retained a certain level of popularity, rather than high-priced sets. Although sales declined substantially compared with the period of exceptional shipment growth in the previous period driven by distributors’ expectations, they remained above the levels recorded through the period before the previous period.」

「For exports of our core Magna-Tiles product to the United States, the quarter began with shipments of inventory left over at the end of the previous period. Some activity then emerged, including new orders in line with signs of a gradual recovery in consumption of moderately priced sets and popular items. Nevertheless, revenue declined by approximately 40% compared with the same period of the previous year, when irregularly large orders had been placed based on distributors’ expectations.」

「During the first half of the current fiscal year, distributors placed large orders to avoid the impact of the unstable supply system caused by the COVID-19 pandemic. In the second half, however, consumers began holding back on purchases against a backdrop of rapidly rising prices and other factors, and during the year-end shopping season distributors moved to reduce accumulated inventories through substantial discounting.」

「The core Magna-Tiles series for the United States recorded a significant increase in sales year on year, as replenishment of distribution inventories ahead of the year-end and New Year period was completed by the third quarter in response to expectations of early distribution demand.」

「Shipments for the United States continued in the second quarter following the first quarter, reaching 473.1% of the year-earlier level for the cumulative second-quarter period.」

「Overseas sales increased significantly to 489% of the year-earlier level. New themed products, including the Magna-Tiles Animals series and Builder series launched in the United States last autumn, continued to perform well and generated a large number of orders.」

「During the current fiscal year, shipments for U.S. sales were disrupted throughout the year due to the impact of the ocean container shortage on shipment plans. However, the company secured containers by every means possible, and sales still increased 51.6% from the previous fiscal year.」

「The global shortage of ocean containers forced changes to shipment schedules through the second quarter. Shipments for the United States that had been delayed were concentrated in the third quarter, resulting in performance significantly above the year-earlier period. The new Animals series of Magna-Tiles also maintained strong sell-through, including strong initial sales. The company will continue taking measures to ensure that shipments proceed as planned and avoid lost sales opportunities caused by stockouts.」

「In the second quarter as well, the company continued to be forced to change shipment schedules due to the global shortage of ocean containers associated with the spread of COVID-19. Although the first shipment of the new Animals series for the Magna-Tiles line for the United States was made in the final month of the period, the company expects the situation to take some time to improve.」

「In overseas sales, the global shortage of ocean containers resulting from the spread of COVID-19 forced changes to the shipment schedule. In particular, shipments of Magna-Tiles for the United States scheduled for April were pushed back to May of the following quarter, affecting sales for the current quarter.」

「In overseas sales as well, the rapid growth in stay-at-home demand during the COVID-19 pandemic led to a sharp increase in sales through e-commerce sites, resulting in higher shipments of Magna-Tiles to the United States.」

「In the third quarter, the composition of overseas sales continued to center on exports of Magna-Tiles for the United States. Sales of infant and educational toys for China and other Asian markets also increased, reflecting higher toy demand during the COVID-19 pandemic, and contributed to the increase in sales.」

「In overseas sales, the core Magna-Tiles series for the U.S. market generated substantially higher revenue than in the same period of the previous year because the company made substantial shipments during the quarter, compared with shipment adjustments in the same quarter of the previous year. Existing customers outside the United States also moved quickly to promote consumption as stores reopened, generating revenue above the same period of the previous year.」

「In contrast, overseas sales secured solid revenue, mainly from products for the United States, as products that had completed manufacturing were shipped steadily. Sales significantly exceeded the year-earlier period, when shipments had been adjusted.」

「In overseas sales, market expansion in China remained gradual, but sales were strong during the current period, led by the "Yaritai Houdai" series. Meanwhile, in the main U.S. market for Magna-Tiles, numerous low-priced competing products emerged and competition for market share intensified, causing sales to decline during the current period.」

「In overseas sales, shipments of Magna-Tiles for the United States were concentrated in August and September, making October an adjustment month.」

「In overseas sales, the company began full-scale shipments of existing Magna-Tiles products for the U.S. market from the second quarter. In addition, substantial shipments of high-priced products such as the new METROPOLIS, which expands the range of play, at a retail price of US$130, increased revenue as products not shipped in the previous fiscal year. Increased shipments to China, including “Yaritai Houdai Big” and “Water-Based Educational Toy,” also contributed.」

「In overseas sales for the current quarter, the main shipments of Magna-Tiles for the United States were rescheduled to the second quarter, which was the primary factor affecting overall cumulative first-quarter results. Total domestic and overseas sales were ¥770 million, down 18.1% from the year-earlier period. Although the shipment dates for Magna-Tiles in overseas sales were rescheduled, sell-through of the product remained firm, and overseas segment sales are expected to be adjusted in the second quarter.」

「Overseas sales offset the first-half shortfall from the previous year by November and exceeded the previous year on a cumulative basis. As a result, total sales for the consolidated fiscal year, including domestic sales, were ¥4,146 million, limiting the decline to 2.8% from the previous fiscal year.」

「In overseas sales, shipments of existing Magna-Tiles products for the U.S. market were adjusted during the first half of the fiscal year. In the third quarter, however, strong sales of 6 new products, including the new Magna-Tiles Freestyle and the Magna-Tiles Stardust product for girls, generated additional orders and became a major factor behind the quarter’s revenue growth.」

「In the overseas business in the 42nd fiscal year, shipments of Magna-Tiles mainly for the United States were adjusted to be concentrated from the second half onward. As a result, overseas sales were below the previous year during the cumulative second-quarter period and had a significant impact on total sales, which amounted to ¥1,699 million for cumulative domestic and overseas consolidated sales.」

「In overseas sales, closing sales following the bankruptcy of Toys "R" Us in the United States became active in March of the current quarter, but the company's Magna-Tiles were not handled by Toys "R" Us and therefore were not directly affected. However, although lower-priced refill sets of Magna-Tiles continued to sell well and were shipped for replenishment in the first quarter, high-priced sets remained in a situation where inventory shipped in the previous period before the Lunar New Year was being sold down during the current period. Together with the dollar remaining weaker than in the previous year, this caused sales to fall slightly more than 10% below the year-earlier period.」

「In global sales, the company has begun doing business with new distributors in China and Russia.」

「In overseas sales, shipments were concentrated in the following quarter, resulting in sales of ¥1,044 million in the third quarter, down 13.2% from the year-earlier period and remaining at the lower end of the expected range.」

「In the second quarter, overseas sales recovered due to concentrated shipments and offset the decline in sales in the first quarter, while domestic sales remained sluggish. As a result, total sales for the cumulative second-quarter period were ¥1,980 million, down 10.7% from the year-earlier period.」

「The factors were limited to those anticipated at the beginning of the fiscal year, including the decline in domestic sales of the Bicycle and Ride-ons division during the current quarter, mainly because the year-earlier quarter had represented a record period for bicycle shipment volumes, as well as the decline in overseas sales caused by fluctuations in shipment volumes associated with production adjustments for the Lunar New Year, which began earlier than usual.」

「Strong overseas sales offset the shortfall in domestic sales through shipment volume growth, which countered the significant depreciation of the dollar from the year-earlier period.」