The toy industry is in the doldrums. Retail toy sales have flattened worldwide during the last few years. In the 21st Century, age “compression” has made toy companies face new competitors and become just one part of the greater “play industry,” which consists of those who create immersive digital worlds, developing apps, video games, and manufacture devices. It seems kids nowadays are not amazed by new Barbies or cars and have new interests. Moreover, the economic crisis in developed markets puts a question mark on the inventory position of retailers.
Let’s see how three major players are doing in this difficult context.
Expansion plans to reduce exposure
Hasbro, Inc. (NASDAQ:HAS) offers a wide range of toys, games and licensed products under well-known brands, not only for children but for the family in general as well.
Net revenue from this quarter was $663 million, up 2.2% compared to last year. The categories that helped this moderate improvement were games, girls and preschool, while boys fell 20%. This shows a strong brand recognition and product lineup. However, we have to pay attention to the evolution of the boys segment, since it has been one of Hasbro, Inc. (NASDAQ:HAS)’s growth engines for years. Another negative aspect is the fact that the company is quite exposed to Europe, having obtained 28% of its revenues in 2012 from that region. This area of the world remains sluggish, and could easily impact Hasbro, Inc. (NASDAQ:HAS) in the next quarters.
The main strategy to increase profits in the short term is a company-wide cost-saving initiative, which plans to save $100 million per year by 2015. In the mid-term, a joint venture with the Discovery TV show “The Hub” should be able to increase revenues and brand awareness. Plus, Hasbro, Inc. (NASDAQ:HAS) is looking at building long-term alliances with companies present in the digital world. This is a strategic market in terms of future growth.
Hasbro, Inc. (NASDAQ:HAS) has expansion plans to broaden its reach in the emerging markets. This attempt will generate advertising costs, but will prove to be significantly beneficial in terms of reducing exposure to the sluggish developed markets. I strongly support this strategy as it proves the company is willing to maintain its position and grow in the medium/long term.
Mattel, Inc. (NASDAQ:MAT) holds an industry-leading position in the design, manufacture and marketing of family products and toys.
Even if these are not the best days for the industry, Mattel, Inc. (NASDAQ:MAT) has shown during the first quarter of 2013 a strong balance sheet and sales growth of 7% year over year, beating estimations. The main contributors were The American Girl and Monster High products, as well as the expansion in emerging markets and strong sales in Europe. However, core Fisher-Price products did not perform well, suggesting the need for brand repositioning.