Shares of Sanrio Co., the Japanese company behind Hello Kitty and other popular characters, fell sharply on Tuesday after it reported a first annual loss in more than a decade and slashed its dividend.
The Tokyo-based licensor posted a net loss of ¥2.8 billion ($18.5 million) for the fiscal year ended March 31, 2024, compared with a ¥7.1 billion profit a year earlier. Revenue declined 11.2% to ¥74.3 billion, marking the second consecutive year of declining sales.
Sanrio attributed the downturn to weaker demand for its character merchandise, particularly in Asia, where sales fell 15%. The company also cited supply chain disruptions and higher production costs as contributing factors. Operating profit dropped 42% to ¥3.2 billion.
In response, Sanrio reduced its annual dividend by 50% to ¥20 per share, down from ¥40 in the prior year. The company warned that ongoing macroeconomic pressures and soft consumer spending could further weigh on performance in the current fiscal year.
Analysts at Mizuho Securities downgraded Sanrio to "neutral" from "buy," citing concerns over the sustainability of its licensing model amid shifting consumer preferences. The stock, which had already fallen 12% year-to-date, dropped an additional 8% in Tokyo trading following the earnings release.
Sanrio, founded in 1960, has long relied on its iconic characters to drive revenue through licensing deals, retail partnerships, and direct sales. However, the company faces increasing competition from digital entertainment and gaming platforms, which have captured a larger share of consumer spending.
The company’s management acknowledged the challenges but expressed confidence in its long-term strategy, including expansions into new markets and product categories. Investors, however, remain cautious amid the broader slowdown in consumer goods and retail sectors.
