What's going on?
On Friday, Hasbro threw its toys out of the stroller after its profit missed analyst estimates – and its shares tumbled 1%.
What does this mean?
Hasbro – the maker of Twister and Scrabble – had a profitable fourth quarter overall. However, the death of formerly magical place Toys R Us meant sales were lower and, as a result, Hasbro didn’t make as much money as expected. The toy store was Hasbro’s largest customer in the US, Europe, and Asia.
Meanwhile, rival toy maker Mattel was in a Barbie world (literally – more below) after its shares soared 23% – strong Christmas sales helped surpass investors’ expectations that it was heading for a quarterly loss.
Why should I care?
For markets: Billion dollar Barbie.
Both toy makers have been on shaky ground sans Toys R Us. But with Barbies flying off the shelves, Mattel’s turnaround strategy seems to be paying off: sales of the doll grew 12% to a five-year high (and even Hot Wheels are hot again). The popularity of Mattel’s Barbie was helped by the absence of a new Disney princess movie (driving pre-teens right into Barbie’s plastic arms). Hasbro owns the merchandise rights for said Disney movies – and Star Wars, which also didn’t have a fresh installment last year. Hasbro’s investors might be hoping their riches will return with the Jedi…
The bigger picture: Silver screen fame.
Fewer and fewer children are playing with toys, instead favoring tablets and smartphones. That means their money (or, more likely, their parents’ money) is being spent on apps and in-app purchases. Toy makers might need to rethink and adapt their business models overall – and Hasbro might want to take a page out of Mattel’s playbook. Mattel is hoping to boost sales by creating its own film department, which would give its toys some of that Hollywood stardust (tweet this) – not to mention generate it some additional cash from movie sales.