Hasbro and Mattel have very different visions of the future
Target Houston customers shopping for toys on October 25, 20,21, Houston, Texas
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Although both the nation’s top toy firms reported substantial revenue gains during the critical holiday quarter as well as throughout 2021 only one expects sustained growth.
Gerrick Johnson of BMO Capital Markets, an analyst said that Mattel has a “sense of optimism and confidence.” “And Hasbro’s defensiveness.”
Mattel expects consumers to accept price hikes and still buy with the same frequency and volume that they were during the pandemic. But, a lot of this sales growth occurred because parents turned to toys during the pandemic to keep their children entertained. This was made possible by the stimulus payments and child tax credit.
Hasbro is observing a cautious optimism, as it expects that sales growth will slow in the coming years due to increased spending on leisure and travel.
Stephanie Wissink (managing director of Jefferies) stated that “that piece” is something investors today are grappling with. Why is Hasbro’s vision of the core toys business more conservative than Mattel’s?
Mattel’s optimism is fueled by a success turnaround. This led to Barbie’s brand recording its greatest full-year sales performance in the company’s more than 60 year history. Even previously troubled brands like American Girl, Fisher-Price and Thomas and Friends have been revitalized.
Mattel’s fourth-quarter revenue rose 10% to $1.80 Billion, surpassing analysts’ expectations of $1.66 Billion. It earned 53c per share, excluding items. This is higher than the 30 cents estimate.
Wissink explained that sustainability is now the issue. She stated that Mattel was adopting the Euromonitor 5% approach and believes the toy market will continue growing faster and for longer periods of time.
The company has updated its outlook for the coming two years as a result. Mattel said Wednesday during its earnings call that net sales will grow by between 8% and 10% in 2022. Then, the company expects to expand at a low single-digit pace for the year. The company previously predicted that both years would see growth of the low single digits.
The Barbie dolls of Fashionistas, the U.S.-based toy maker Mattel, are displayed at Mattel’s stand during the International Toy Fair on January 28th 2020 in Bavaria and Nuremberg. 2020.
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“2021 has been another year of strong financial performance,” said Anthony DiSilvestro, the company’s chief financial officer, on the call Wednesday. We have seen significant improvements over the past four years and, as Ynon stated, “We have made substantial progress in recent years.” [Kreiz, Mattel’s CEO,]Our turnaround has now been completed, as you may have noticed. We are confident in the future and have provided guidance and goals for 2022.
Mattel shares were up over 13% this week. It closed Monday at $24.20. That’s an increase of 7 cents. This puts its market value at $8.48 million. Analysts have a target price average for the company of $30. This is a 24% increase. There are many upsides for the future.
Linda Bolton Weiser (an analyst at D.A. Davidson seems even more optimistic. Her price target was raised to $45, from $38 Monday. This is due to the possibility of growth over the next few years.
Mattel’s recent announcement that it has acquired a new facility adds to its confidence won back the licensing rights to Disney’s princess dolls. It was a devastating loss for the company that resulted in this license being lost in 2016, and it is only now in a position to make restitution.
In 2023, the company will release its first movie under Mattel Films. Margot Robbie stars in “Barbie”, directed by Greta Gerwig (Academy Award Winner).
Mattel has not yet set the release date for about twelve feature films featuring its brands including Hot Wheels (Magic 8 Ball), Polly Pocket and Rock ’Em Sock ‘Em Robots), Uno, Barney, Uno, and Uno. Its fledgling film division plans to use third-party companies as a financing source and to partner with distributors and studios. This strategy reduces the company’s risk financial.
Mattel will likely discuss its growth strategy in detail on Friday at its annual analyst presentation.
Archrival Hasbro is more optimistic about the future of the toys industry.
Wissink said that Hasbro looks at real-time data. They are heavily informed also by an economic perspective that suggests we’re entering a period of uncertainty about consumers’ ability to absorb inflation.
Hasbro stated last week that it expects revenue growth in the single digits for 2022. Deborah Thomas is the chief financial officer at Hasbro. Although the gaming and toys industry has experienced a rapid growth rate in recent years, it doesn’t see that trend continuing. It said that they expect the industry to slow down or shrink over the next year.
Hasbro is also worth mentioning. a new CEO starting on Feb. 25. Chris Cocks (the former Wizards of the Coast President) will replace Rich Stoddart as interim CEO. Stoddart held the position for two years. Brian Goldner passed away in October 2021.Analysts suggested that Hasbro could be deliberately setting its sights low as Cocks begins to settle into his new job.
Hasbro will also be considering the effect of the pandemic upon its film production. Hasbro’s “Transformers,” the newest film in its series, was delayed to 2023. This results in delays in ticket sales as well as product line development. Hasbro also held the Disney princess licence and was defeated by Mattel.
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Eric Handler of MKM Partners, a media and entertainment analyst said that “the stock fell.” “The Street made adjustments in 2023 by adding Transformers and acquiring the Disney princess license. Hasbro continues to tell an amazing story. This media transformation is still in its early stages. However, people saw it as mixed because of these puts and takes.
Although Hasbro posted a strong fourth quarter earnings beat, the stock closed flat. Even though inventory disruptions caused by global supply chain disruptions saw revenue rise 17% to $2.01billion. This was well above the analysts’ estimate of $1.87billion.
Hasbro shares closed Monday at $94.56. This is an increase of 17c. The average price target for Hasbro shares is $112 with a 20% upside, according to analysts. The current market value of the company is $13.05 million.
The late Goldner led Hasbro’s transformation from a toy business to an established media company. Hasbro strengthened its strategy with the acquisition of Entertainment One, 2021. This made it possible for Hasbro to serve as a studio on many projects.
Johnson, BMO CEO said that this was the genius of Brian Goldner. He believed brands should be holistic. Toys plus entertainment equals more business. Toy brands last longer if they have great storytelling.
Although Hasbro’s toys still account for 62% of the company’s revenue (or $3.98 Billion in 2021), there are other areas of Hasbro that have a growing importance. Wizards of the Coast’s revenue in 2021 was $1.28billion, which is 20% of the total company revenues. Entertainment, however, was 17.9% of the total or $1.15billion.
Johnson explained that Mattel has gone vertically while Hasbro went horizontally. It will take time to determine which approach is most effective.