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In today’s challenging economic environment where consumers put discretionary purchases on hold, toys have taken a bit of a hit. Major toy companies Hasbro (NASDAQ: HAS ) and Mattel (NASDAQ: MAT ) witnessed the impact of inflation on their latest quarterly sales. Here are some of the strategies implemented by these toy companies and their upcoming expectations:
Sales and profits
Hasbro’s revenue in the third quarter of 2022 fell 15% year over year to $1.68 billion. The results were primarily impacted by product delivery timing due to anticipated supply chain challenges and the postponement of certain game and entertainment content releases to the fourth quarter. The results were also hurt by inflationary pressures on consumer spending. Adjusted EPS fell 28% YoY to $1.42.
Mattel’s net sales in Q3 2022 remained flat at $1.75 billion compared to the prior year period as it faced a challenging macroeconomic environment. On a constant currency basis, sales rose 3%. Adjusted EPS fell to $0.82 from $0.84 last year.
Hasbro experienced a double-digit sales decline across all segments during the third quarter. Mattel witnessed single-digit sales declines in its North American and American Girl segments in Q3 while its International segment recorded 5% sales growth.
Strategies and plans
Hasbro is implementing a new strategy that will help drive growth by focusing on gaming, digital and direct-to-consumer. The company plans to focus on a few larger brands that have the potential to generate more than $1 billion. It will also be able to develop high-margin gaming and licensing businesses while driving significant cost savings. The toy maker aims to increase adjusted operating profit by 50% as well as drive $250-300 million in average annual rate cost savings by the end of 2025.
Hasbro expects to grow its gaming business at a high margin during the fourth quarter of 2022, helped by the MAGIC lineup and the addition of Wordle to its portfolio. The company innovated in major brands like NERF and strengthened its position in high-margin, high-potential categories like preschool with brands like PEPPA PIG and PLAY-DOH.
As part of that strategic effort, Hasbro plans to sell parts of its eOne TV and movie businesses that are not core to its Branded Entertainment strategy. The company’s entertainment line-up includes six films and 20 scripted and unscripted shows for 2023.
Mattel is working on an IP-driven toy business and developing entertainment offerings. In 2023, the company plans to launch Monster High, bring back Disney Princess and the Frozen franchise and expand its portfolio with the addition of Universal’s Trolls.
Outlook
For the fourth quarter of 2022, Hasbro expects revenue of approx. flat on a constant currency basis, buoyed by growth in My Little Pony, Peppa Pig, Marvel, and key game brands. For the full year 2022, revenue is expected to decline slightly in constant currency. Mattel expects net sales for FY2022 to increase 8-10% in constant currency.
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