Next week is Halloween, but you can forgive the big toy companies for looking past that. When they reported their earnings this week, Thomas Buckley writes, investors immediately sought clues about what items will be on letters to Santa this year. Plus: Meet the Baseball Bat Bros. who are driving kids' equipment choices, and learn why the NCAA's NIL problems might require borrowing a solution from baseball. If this email was forwarded to you, click here to sign up. The past two years have been trying for the world's largest toy companies. Industry leaders Hasbro Inc. and Mattel Inc. have contended with a sharp slowdown in sales of G.I. Joe action figures, Fisher-Price's Clack & Quack Goose and the like. Parents desperately loaded up on toys during the Covid-19 pandemic to keep their children occupied at home, buoying the earnings and market values of the toy sellers. Then demand waned as families reemerged and redirected their spending toward experiences such as overseas travel and Taylor Swift concerts. Retailers were then stuck with unsold inventory, and a slate of Hollywood films that was less "toyetic" than usual failed to provide a boost to the relevant intellectual property. It's taken the toymakers longer than anticipated to return to form: On Thursday, Hasbro lowered its full-year revenue forecast for the division that includes toys, saying the category had declined more than expected. Mattel on Wednesday cut its full-year revenue forecast, with strong sales of Hot Wheels miniature cars not enough to offset lower demand for Barbie dolls during the first nine months of the year. Still, Mattel sounded upbeat about the coming holiday season, pointing to signs of a long-awaited turnaround during the industry's most crucial period. It expects sales in the current quarter to accelerate thanks to toys and dolls based on potential blockbusters, including Moana 2 from Walt Disney Co. and Wicked from Comcast Corp.'s Universal Pictures. Hot Wheels cars, which have been boosted by the series Hot Wheels Let's Race on Netflix Inc.'s streaming platform, along with new American Girl and Fisher-Price products, are also expected to be big. Hot Wheels Let's Race has revved car sales at Mattel. Courtesy Netflix In an interview, Mattel Chief Executive Officer Ynon Kreiz said he's anticipating a return to growth that will outpace the wider industry. "We expect a good holiday season for Mattel with more retail support, additional shelf space, greater representation across major holiday catalogs and increased marketing and promotions as compared to the prior year," Kreiz said. "Our research shows that more consumers plan to shop for toys in the fourth quarter, and that the majority of toy shoppers are looking for evergreen, well-known brands, which bodes well for Mattel." Revenue should increase 2%, according to the average of analyst estimates Bloomberg compiled. The picture is more complicated at rival Hasbro, which faces a tougher holiday season without the same ties to big-budget movies. CEO Chris Cocks said on a conference call with investors that the pace of decline in the company's toy sales had moderated significantly in the third quarter compared with the first half of the year, a trend he believes will continue in the current quarter. But Hasbro's sales are still expected to fall 17% in the period, according to the average of analyst estimates Bloomberg compiled, before returning to growth next year. Earlier in October, Hasbro stuck a deal with Disney's Marvel to bring its superheroes into Hasbro's Magic: The Gathering game beginning in 2025, and in April, Hasbro signed an agreement with Playmates Toys to produce and distribute its first Power Rangers collection, also beginning next year. With demand for toys softer in recent years, Mattel and Hasbro have sought to tap into other revenue streams, with Mattel co-producing the blockbuster Barbie movie last year and Hasbro focusing on growing its digital gaming division, which includes the popular Monopoly Go game. The holiday season usually accounts for between 25% and 30% of these companies' annual sales. And, in a tepid industry, Mattel and Hasbro will compete ever more aggressively for their share of stockings. |
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