Hasbro and Mattel this week demonstrated newfound strengths, proving that there's plenty of life for toys even in an era when digital play is rampant at all ages.
The toymakers this week presented investors with evidence from their most recent quarters. Hasbro on Tuesday said that second quarter revenues rose 9% to $984.5 million and adjusted net earnings (factoring out a U.S. pension plan liability) rose 65% to $99.3 million. Mattel on Thursday reported that second quarter net sales rose 2% to $860.1 million, as its loss narrowed to $108 million from $240.9 million in the year-ago period.
Both are taking advantage of the strengths in certain of their own brands to participate in wider pop culture, Mattel most notably with its much-anticipated Barbie live-action film and Hasbro with less iconic projects through its Allspark Studios unit, named after a concept in the fictional universe of its Transformers toys. And both are benefiting from deals with outside franchises (including Mattel's with Toy Story and Hasbro's with Marvel) and creating digital games.
The key is for such productions to stand on their own merits, according to Mattel CEO Ynon Kreiz. "If your approach is to make a movie in order to sell more toys, this is risky at the short-term, consumer[s] see through it and you're risking failure," he told analysts on Thursday, per a conference call transcript from Thomson Reuters StreetEvents. "What we are saying is we are looking to make content that people want to watch. We're looking to make great and quality experiences that will attract consumer[s] and be successful in and of themselves. And if we do that, good things will happen. And of course, we will sell more toys."
Moreover, physical toys do remain important to both companies. Hasbro executives on a conference call this week, according to a Seeking Alpha transcript, noted that "e-commerce has accelerated substantially, with both omnichannel and pure-play retailers driving revenue and point-of-sale growth significantly above the rest of the business," adding that its Play-Doh and Nerf brands did well on Prime Day globally.
However, the Nerf performance over the long haul is a worry for Wells Fargo analysts led by senior analyst Timothy Conder, who otherwise called the quarter "solid" in light of its revenue and earnings beats.
Mattel's dolls category saw a 3% gross sales increase, with Barbie gross sales alone up 9%; its vehicles gross sales were flat, with Hot Wheels gross sales up 5% and its action figures, building sets and games gross sales rose 21%.
Wells Fargo's Conder expressed confidence in those brands, and in Mattel's overall ability to come through on its promises this week that inventory and manufacturing improvements are well underway. "We remain aggressive unapologetic buyers," he wrote in comments emailed to Retail Dive.
