Hasbro and Mattel Work On Their Holiday Problems

Hasbro, Inc. missed analysts' estimates after weak holiday sales pushed revenue down, but the company is still faring better than Mattel, Inc.

Feb 10, 2014 at 4:43PM

Is there any child who doesn't want more toys? I didn't think so, but apparently I understand children to the same degree that I understand nuclear physics. String theory is a thing, right? Anyway, kids these days are unimpressed by the toys of my youth, and toy makers Hasbro (NASDAQ:HAS) and Mattel (NASDAQ:MAT) both reported weak holiday quarters.

For Hasbro, the big hit came in boys' toy sales, while Mattel mainly suffered from a drop in demand for Fisher-Price merchandise.

Boys' sales hit harder than girls'
In 2012, the video game industry sold more than $20 billion worth of product. If you're wondering what children are spending their time with if they aren't playing with toy cars, there's your answer. Over the holidays, it became apparent that everyone was going to suffer from this swing in interests. Mattel, which reported holiday-quarter results at the end of January, had a 6% fall in revenue compared to the same period in 2012.

Hasbro managed to hold sales relatively level over the same period, due to strength on the girls' side of the business. Sales in the company's boys' division fell 16% year over year, while girls' rose 19%. A similar story unfolded at Mattel, where the combined boys' and girls' division had a 4% drop, but the business increased sales of its American Girls line by 3%.

Why the difference in gendered sales?
It's easy to point to the stereotype of boys as video game fiends and girls as lovers of dolls, but that's no longer the case -- if it ever was. Studies have shown that girls now make up half of the gaming population, with their side of the segment growing faster than the boys' side.

The bigger difference is in the success that girls' lines have seen over the past year. Mattel is still running strong with the American Girls line and its Disney Princesses products. Hasbro is enjoying a revival of My Little Pony and recently launched a Nerf weapons line focused on girls, called Rebelle. As an additional factor, Hasbro faced a rough year-over-year comparison in boys', as 2012 had very strong sales in the Beyblade and Marvel lines.

The bottom line
Hasbro's result today fell short of expectations, but the market still had a positive reaction. Management has seen the writing on the wall, it seems, and is now focusing on cutting back on costs and paying out a bigger dividend. Both of those point to a strong long-term strategy, and investors took note. Mattel didn't fare as well, and the stock has fallen 14% since it reported its quarter.

For both brands, the future of sales is going to rely on solid tie-ins for boys and new ideas for girls. The branding that Hasbro has done with Marvel and that Mattel has done with Disney are both excellent examples of what needs to happen. Hasbro's girls' Nerf line sounds very interesting as well, and is one to keep an eye on.

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Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Hasbro, Mattel, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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