Hatchimals Craze Pushes Spin Master to Record With China on Tap

(Bloomberg) -- Toymaker Spin Master Corp. jumped to a record high on the success of its Hatchimals brand, which shows no signs of slowing as the company embarks on an expansion into the potentially huge Chinese market.

Spin Master soared as much as 19 percent Wednesday, its biggest intraday increase, bringing the gain to 143 percent since the Toronto-based company went public two years ago. Investors were impressed by Spin Master's second-quarter results, which beat the highest analyst estimates for revenue and adjusted earnings per share. The company also boosted its full-year sales forecast. The stock traded 18 percent higher to C$44.46 at 1:15 p.m. in Toronto.

Spin Master makes several award-winning toys, including PAW Patrol, Air Hogs and Meccano, but Hatchimals are its blockbuster success. The electronic creatures, which hatch and grow with help from their owners, boosted second-quarter gross product sales in their segment by 311 percent.

Spin Master launched the lower-priced Hatchimals Colleggtibles in the quarter and Chief Operating Officer Ben Gadbois said the toys have been selling out globally.

"We have actually been selling out of Colleggtibles at a faster-than-anticipated rate," Gadbois said on a conference call Wednesday, adding that he can't quantify how much revenue the company has missed out on. "We have subsequently increased capacity and we continue to work with all the retailers on their forecasts."

The toys are key to Spin Master's expansion plans into several markets, including China, where it launched in the second quarter. The company distributes Hatchimals and other toys through Alibaba Group Holding Ltd.'s Tmall.

China's $11.5 billion toy market is enormous but the vast majority of it is served by local toymakers with lower price points, Gadbois said.

"Nonetheless, it is a market that will continue to become more important, that we expect to continue to grow and we also expect the Chinese consumer to desire more and more brands as we go forward," he said. "So we also see it as a very, very important strategic investment into our future over the medium to long term."

Spin Master will launch a new "surprise" version of Hatchimals on Oct. 6 and continues to look for other growth opportunities through acquisitions.

To contact the reporter on this story: Kristine Owram in Toronto at kowram@bloomberg.net.

To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, David Scanlan, Kevin Orland