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Hasbro and Mattel Earnings: A Tale of Two Toy Companies

MAT Revenue (TTM) Chart

When industry-leading toy-seller Mattel, Inc. (NASDAQ: MAT) reported its financial results on Jan. 25th, investors weren't impressed with its performance. Sales were down, and the company missed analyst estimates for both revenue and earnings.

This wasn't an isolated incident, either. Growth has been slowing for some time, with revenue in a downward trend in each of the last three years. The stock plunged nearly 18% the following day.

MAT Revenue (TTM) Chart

MAT Revenue (TTM) data by YCharts .

When it rains, it pours

For the most recent quarter, worldwide sales were down 5%, or 1% using constant currency, while full-year sales were down 3%, and flat using constant currency. Here's a quote from the earnings press release by Mattel Chairman and CEO Christopher Sinclair:

Our results were negatively impacted by a number of industrywide challenges, including a significant U.S. toy category slowdown in the holiday period, and increased forex headwinds, and while our sales at retail remained strong, the slowdown triggered elevated retail promotional activity and decreased shipping, all of which had a significant impact on our gross margin.

Sounds like the entire industry had dark clouds looming. Or did it?

Sunshine on a cloudy day

The day after the release of its financial results, Hasbro, Inc. (NASDAQ: HAS) saw its stock jump by 14%. In its most recent quarter, worldwide sales grew 11%, or 12% using constant currency, while full-year sales grew 13%, or 14% using constant currency. Here's what Hasbro Chairman, President, and CEO Brian Goldner had to say about the quarter:

There has been a great deal of focus on the performance of the toy industry and the read through for Hasbro's performance. Importantly, the industry is growing and continued to grow throughout 2016... we do not view and did not experience the season as different from other years.

If there were industrywide challenges, why wasn't Hasbro rained out? Two factors play a role here, both equally important.

Barbie dolls in a variety of sizes, shapes, and colors.

Barbie introduces a variety of body types, skin tones, and eye colors. Image source: Mattel.

Every cloud has a silver lining

This strategy of focusing on storytelling with big and small screen tie-ins, combined with the leverage provided by the acquisition of licensing rights to Disney's Princess properties, has been a winning combination for Hasbro. Mattel isn't wallowing in defeat, however. It's releasing a new line of its iconic Barbie dolls featuring a variety of body types, skin tones, and eye colors in an effort to evolve and embody the diversity in the world and win back customers. Time will tell if this initiative will be successful.

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Danny Vena owns shares of Hasbro, Mattel, and Walt Disney and is a kid at heart. Danny Vena has the following options: long January 2018 $80 calls on Walt Disney and short April 2017 $105 calls on Walt Disney. The Motley Fool owns shares of and recommends Hasbro and Walt Disney. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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