Shares of toy-making giants Hasbro and Mattel took a nosedive on Thursday as both companies indicated that sales might slow down in the critical fourth quarter.
Hasbro’s stock plummeted by over 10% on Thursday, while Mattel’s shares slid by more than 7%. The two toymakers reported their third-quarter earnings separately and revealed the hurdles they face as they approach the holiday season. With consumers tightening their purse strings due to inflationary pressures, toys and games, the core products of both Hasbro and Mattel, could see reduced demand as shoppers become more cautious about their spending.
Hasbro, renowned for its iconic brands such as Play-Doh and Monopoly, revised its full-year guidance downward. The company now expects a revenue decline of 13% to 15% for the year, a more significant drop than its previous forecast of a 3% to 6% decrease in revenue. Hasbro attributed this change to a “softer toy outlook,” as mentioned in its earnings release on Thursday.
CEO Chris Cocks expressed caution during Hasbro’s earnings call, saying, “We have a cautious outlook on the holiday. We do not have a real solid view on where the market will go.”
Mattel’s fourth-quarter toy sales guidance, released on Wednesday, also alarmed Wall Street despite its strong third-quarter results.
Citi Research analysts pointed out that Mattel’s impressive third-quarter earnings were somewhat overshadowed by a “weaker-than-expected implied guide” for the fourth quarter. This implied guide suggested lackluster performance for Mattel’s products outside of its popular Barbie line.
While Mattel exceeded Wall Street’s expectations in terms of both revenue and profit in the third quarter, Hasbro’s third-quarter report fell short of analyst estimates gathered by LSEG, formerly known as Refinitiv. Hasbro’s adjusted earnings per share of $1.64 missed expectations of $1.70 per share, and its revenue of $1.5 billion was below the estimated $1.64 billion.
Hasbro’s revenue for the quarter dropped by 10% compared to the same period the previous year, primarily due to declines in its consumer and entertainment segments. In contrast, Mattel posted a 9% increase in revenue, mainly fueled by strong Barbie sales, boosted by the success of a blockbuster summer film.
Hasbro’s consumer segment, which includes beloved toy brands like Nerf, My Little Pony, and Transformers, saw an 18% decrease in sales. The company attributed this decline to “exited licenses and softer category trends.”
The entertainment segment of Hasbro also faced challenges, with revenue falling by a significant 42% year-over-year. This sharp decline was mainly attributed to strikes by writers and actors, as the company had earlier announced the sale of its film and TV business eOne, home to popular characters like Peppa Pig, to Lionsgate for $500 million.
As both Hasbro and Mattel brace for a tough holiday season, uncertainties loom large in the toy industry. With consumers and economic factors working against them, these companies must navigate the challenges ahead to ensure a successful end to the year.
(Source: Drew Richardson | CNBC)
