Sanrio shares fall after weak quarterly profit

Shares of Sanrio Co., the Japanese company behind Hello Kitty and other popular characters, fell sharply on Wednesday after the firm reported quarterly profit that missed market expectations.

The Tokyo-based company posted a net profit of ¥1.2 billion ($8.1 million) for the three months ended March 31, down 18% from a year earlier and below the ¥1.5 billion forecast by analysts surveyed by Refinitiv. Revenue declined 5% to ¥14.7 billion, reflecting weaker demand for licensed merchandise amid soft consumer spending in key markets.

Sanrio said the results were impacted by higher production costs and supply chain disruptions, which offset gains from new product launches. The company’s operating margin narrowed to 8.2% from 10.1% in the same period last year.

The stock, which had gained 12% in the prior quarter on optimism around licensing deals, fell as much as 8% in morning trading before paring losses to 5.2% by midday. The broader Topix index was down 0.3%.

Analysts at Mizuho Securities noted that while Sanrio’s brand strength remains intact, the earnings miss highlights ongoing challenges in monetizing its intellectual property amid macroeconomic headwinds. The firm maintained a neutral rating on the stock with a price target of ¥2,800.

Sanrio’s shares have underperformed the Topix by 4% over the past month, closing at ¥2,450 on Tuesday. Investors will be watching for updates on cost management and recovery in discretionary spending when the company holds its earnings call next week.