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Hasbro and Mattel have very different visions for the future

Customers shop for toys at a Target store on October 25, 2021 in Houston, Texas.

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Hasbro and Mattel have very different ideas about the future of the toy industry.

While the country’s two major toy companies recorded strong revenue increases in the crucial holiday quarter and throughout 2021, only one expects continued robust growth.

“There’s a sense of confidence and optimism behind Mattel,” said BMO Capital Markets analyst Gerrick Johnson. “And a defensive attitude from Hasbro.”

Mattel expects consumers to accept further price increases and continue to buy at the same volume and speed as they have during the pandemic. However, much of this sales growth has come on the backs of parents who have turned to toys to fill the hours spent at home during the pandemic and have been aided by wallets that have been padded with payments from stimulus and child tax credits.

That has led to tempered optimism at Hasbro, which expects sales growth over the next two years to recede as travel and leisure spending rebounds.

“This coin is something investors are struggling with today,” said Stephanie Wissink, CEO of Jefferies. “Why is Hasbro’s view of the core toy business a bit more conservative than Mattel’s view of the toy business?”

Mattel’s optimism

Mattel’s optimism follows a successful turnaround, which saw the company’s Barbie brand post its best full-year sales results in its more than 60-year history. Even the company’s previously beleaguered brands, including American Girl, Fisher-Price and Thomas and Friends, have been revitalized.

Mattel’s revenue jumped 10% to about $1.80 billion in the fourth quarter, beating analysts’ estimates of $1.66 billion. Excluding items, it earned 53 cents a share, above estimates of 30 cents.

“Now the question is sustainability,” Wissink said. “Mattel is taking the ‘Euromonitor told us 5%’ approach, and as a result we believe the toy industry is going to grow faster and longer and it’s inelastic,’” she said.

This led the company to update its expectations for the next two years. During Mattel’s earnings call on Wednesday, he said he expects net sales in 2022 to grow 8% to 10% and then to a high single-digit pace the following year. . Previously, the company predicted mid-single-digit growth for both years.

Barbie dolls from the Fashionistas range of American toymaker Mattel are displayed at the company’s stand at the International Toy Fair on January 28, 2020 in Bavaria, Nuremberg. 2020.

Daniel Karman | wedding ring | Getty Images

“2021 has been another year of strong financial performance,” Anthony DiSilvestro, the company’s chief financial officer, said on the call Wednesday. “We have made significant progress over the past four years, and like Ynon [Kreiz, Mattel’s CEO,] noted, our turnaround is now complete. Our guidance for 2022 and our targets for 2023 reflect our momentum and confidence in our future performance.”

Mattel’s stock rose more than 13% during the week. On Monday, it closed at $24.20, up 7 cents, bringing its market value to $8.48 billion. Analysts currently hold an average target price for the company at $30, or 24% up for the future.

Linda Bolton Weiser, analyst at DA Davidson, is even more optimistic. It raised its price target to $45 from $38 on Monday, citing the potential for growth in the coming years.

Mattel’s confidence is bolstered by recent news that it has reclaimed the licensing rights to Disney’s princess dolls. The loss of this license in 2016 left a huge hole in the company’s business portfolio from which it could only recently recover.

The company will also see the release of its first film under the Mattel Films banner in 2023. “Barbie” will star Margot Robbie and will be directed by Oscar winner Greta Gerwig.

Mattel has yet to set release dates for a dozen feature films based on its brands, including Hot Wheels, Magic 8 Ball, Polly Pocket, Rock ‘Em Sock ‘Em Robots, Uno and Barney. The strategy of its nascent film division is to rely on third-party companies to finance each project and to partner with a studio and a distributor. This strategy helps to mitigate the company’s financial risk.

Mattel is expected to discuss further details of its growth strategy on Friday during its annual presentation to analysts.

Hasbro’s caution

Meanwhile, archrival Hasbro’s outlook for the toy industry is much more conservative.

“Hasbro is looking at the data in real time and they’re also heavily informed by an economic view that we’re entering a phase of some degree of uncertainty about consumers’ willingness to digest inflation,” Wissink explained.

Last week, Hasbro said it expects single-digit revenue growth in 2022. Deborah Thomas, the company’s chief financial officer, said that while the toy and game industry had grown to a Above-trend pace over the past couple of years, the toymaker doesn’t expect that to continue, saying it expects the industry to slow or decline in the coming year.

Also of note, Hasbro has a new CEO starting February 25th. Chris Cocks, the former president of Wizards of the Coast, takes the reins from interim CEO Rich Stoddart, who held the position after the death of Brian Goldner in October 2021. Analysts have speculated that Hasbro may intentionally fix its low goals for the next few years as Cocks settles into his new position.

Additionally, Hasbro is considering the impact of the pandemic on its film production. His latest movie “Transformers” has been delayed until 2023, resulting in delays to ticket sales and product lines. Also, Hasbro was the company that held the Disney Princess license and lost out to Mattel.

Hasbro game maker.

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“The stock has gone down,” explained Eric Handler, media and entertainment analyst at MKM Partners. “The Street had to make adjustments in 2023, adding ‘Transformers,’ but removing the Disney Princess license. Hasbro still has a great ongoing story. Its media transformation is just beginning. But because of these bets and takes , I think people saw it as a mixed situation.”

Hasbro stock ended the week virtually flat, despite a significant decline in fourth-quarter earnings. Revenue rose 17% to $2.01 billion, above analyst estimates of $1.87 billion, despite stock-outs over the holiday season due to supply chain disruptions. global supply.

Shares of Hasbro closed at $94.56 on Monday, up 17 cents. Analysts currently hold an average price target of $112, up 20%. Its current market value is $13.05 billion.

Under the late Goldner’s leadership, Hasbro evolved from a toy company into a full-fledged media competitor. The acquisition of Entertainment One in 2021 solidified Hasbro’s strategy, allowing it to act as a studio for many projects.

“He’s the genius of Brian Goldner,” said BMO’s Johnson. “He understood that brands are holistic. Entertainment plus toys equals bigger business. And when you put the storytelling behind a toy brand, it lasts longer.”

While Hasbro’s toy division still accounts for 62% of its revenue, or about $3.98 billion in 2021, other aspects of its business are now gaining in importance. In 2021, Wizards of the Coast and digital games accounted for $1.28 billion in revenue, or 20% of the company’s total, and entertainment was 17.9%, or $1.15 billion.

“Mattel is becoming more horizontal while Hasbro has become more vertical,” Johnson said. “Time will tell what the right way to do it is.”


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