The market for toy companies remains challenging due to a variety of factors. So-called ‘age compression’ is affecting toy manufacturers, with electronic gadgets and games becoming more popular than toys. Toy companies have to sell their products before kids’ interests shift to other types of entertainment, or shift their focus to participate in the new industry.
Consolidation across the industry has also shrunk the retail market for toys as mass merchants have displaced specialty retailers. In addition, the rise of competition from private label toys has become a new threat for the big players while consumer confidence in the US and Europe continues to remain low.
Given these circumstances, let’s see how three players in the industry are performing.
is the world’s second-largest manufacturer of toys. It designs, manufactures and markets a variety of toy products worldwide.
The company’s first-quarter earnings per share grew year-over-year, driven by sales growth from the “American Girl” and “Monster High” brands and strong performance in Europe. Mattel, Inc. (NASDAQ:MAT) is also enjoying a good position overseas, with international sales growing 9%.
Mattel, Inc. (NASDAQ:MAT) is very focused on expanding its bottom line. Its Global Cost Leadership Program along with its cost-savings campaign Operational Excellence (OE) 2.0 managed to achieve cumulative cost savings of $187 million by the end of 2012. In addition, OE 3.0 will deliver an extra $150 million reduction by the end of next year. I highly support these successful initiatives.
With a leading position in the industry, Mattel, Inc. (NASDAQ:MAT) possesses strong brand recognition due to its traditional category-leader toy brands such as “Barbie” and “Hot Wheels.” In Feb. 2012 Mattel acquired HIT Entertainment, an entertainment distribution company which is poised to provide future growth opportunities due to toy license retention.
The company continues to optimize its entertainment partnerships as well. Its alliances with entertainment powerhouses like The Walt Disney Company (NYSE:DIS), Dreamworks Animation Skg Inc (NASDAQ:DWA), and Nickelodeon will secure great sales figures in the future. However, the modest performance of the company’s leading “Barbie” brand and a weakness in its Fisher-Price core products remain potential concerns.
Hasbro, Inc. (NASDAQ:HAS)
produces children’s toys and family leisure time products with a range of portfolio of brands and entertainment properties. The company’s brand architecture identifies franchise brands, challenger brands, key partner brands and new brands.
The company’s first-quarter earnings of $0.05 per share increased 25% year-over-year, driven by top-line growth and an increase in the operating margins. Hasbro, Inc. (NASDAQ:HAS)’s net revenue grew 2.2% to $663.7 million, including a $3.3 million impact from currency translations. Despite a moderate 4% net revenue increase in the US and Canada segment, its operating profit grew 162% to $37.7 million.
Hasbro, Inc. (NASDAQ:HAS) is applying a long-term cost savings program that will ensure decent profitability. The initiative aims to provide $100 million in annual savings by 2015. In 2012, operating margins increased 15% in the US and Canada, despite a 6% decrease in sales.
The company’s strategic partnerships with gaming companies and lucrative product associations will guarantee Hasbro, Inc. (NASDAQ:HAS) a good position in the future. Hasbro has broadcasting deals with Discovery, Cartoon Network and Mediaset in Europe. In addition, the company’s alliance with Electronic Arts Inc. (NASDAQ:EA) will extend the brand further into the digital world. Digital gaming and casual entertainments is expected to grow substantially in the future.