The two biggest U.S. toymakers, Hasbro
Hasbro
Mattel
Investors had been expecting bad news from Mattel, which reported yesterday after the market closed, and Hasbro, which reported this morning. But Wall Street rewarded the two toymakers for demonstrating that their efforts to reduced bloated inventories, and to cut costs, are paying off.
Hasbro’s stock was up over 12% today, at $65.27, as of 10:30 a.m. today, one hour after it concluded its earnings call with investors. Mattel’s stock was up close to 6%, at $19.83, mid-morning, following its Tuesday earnings release.
Hasbro’s stock soared despite reporting that its first quarter revenue dropped 24% during the quarter. That drop, however, was less than analysts expected. The company attributed much of the decline to the divestiture of its eOne film and television unit. Excluding that impact, Hasbro said, total revenue declined by 9%.
Traditional Toy Sales Decline
While Hasbro’s Wizards of the Coast and digital gaming segment was up 7%, and the entertainment segment was up 65%, the consumer products segment – the key category covering traditional toy sales – was down 21%.
Hasbro also reported adjusted net earnings of 61 cents per share, much stronger than the consensus expectation of 27 cents a share.
Mattel impressed Wall Street by posting a lower than expected adjusted loss of 5 cents a share, but it missed revenue expections, with net sales down 1%. Analysts had forecast a slight increase in sales.
Both toymakers are playing a turnaround game this year and, in their earnings calls, Mattel and Hasbro executives emphasized that they believe they are well positioned for growth in 2025 and beyond.
“We began 2024 with a healthier balance sheet, a leaner cost structure and an improved inventory position,” Chris Cocks, Hasbro CEO, told investors. The improvements the company has made thus far, “give me confidence Hasbro is pointed towards sustainable, long-term growth,” Cocks said.
Hasbro made a number of drastic cost-cutting moves heading into 2024, including announcing in December that it was eliminating over 1,000 jobs due to weak holiday sales.
Mattel Expects To Gain Market Share
Mattel CEO, Ynon Kreiz, in his call with investors, said his company “is in the strongest financial position it has been in years”, and that it is “well-positioned to create long-term shareholder value.” Kreiz, on the call, said he expects Mattel to outpace the rest of the industry in terms of growth, and to gain market share, this year.
James Zahn, Editor-in-Chief of The Toy Book, the leading industry publication, said Mattel’s first quarter sales were significantly better than he anticipated. “I expected a 3-4% decline in sales, so dipping just 1% is a win,” Zahn said. “Even more compelling is the 2% growth in North American sales. It may not sound like much, but that’s a positive sign for the industry as a whole,” he said.
Zahn also credited Mattel with doing “a great job of keeping hot products in stock at traditional retailers while simultaneously building a robust direct-to-consumer platform with same-day sellouts on premium products and premium prices via Mattel Creations.”
Hasbro, Zahn said, took a hit in sales during the first quarter because closeount merchandise caused by the bloated inventories is still being sold in discount stores.
“As I noted during the holiday season, the sheer volume of Hasbro product making its way into the value and closeout channels was shocking,” Zahn said. “Here we are in April and a bit more is still trickling into those channels. Unfortunately, unloading so much merchandise at pennies on the dollar is creating a bigger issue with consumer price perception,” he said. “If a Hasbro action figure is $5 at Ross, why would they go pay $20 to $25 for another character in the same line at Walmart
Walmart
Target
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