3 Toy Retailers Going for the Gold

Board games versus movies. Barbie versus Bratz. The toy industry has been anything but sleepy these days and the toy makers have been animated in promoting the safety of their playthings in the wake of the recalls that plagued the industry last year. Tougher standards. More testing. In fact, even in the teeth of a dour recession the toy makers have been playing for keeps.

Here are the kings of their sport that ought to do well and take home the gold:

Bronze: JAKKS Pacific (Nasdaq: JAKK  )
A quirky toy portfolio coupled with licenses to some of today's most popular names -- Hannah Montana, NASCAR, World Wrestling Entertainment  -- has helped the small $628 million toymaker compete with the big boys. In fact, its award-winning EyeClops was one of the bets sellers during last year's holiday season.

Yet there's risk there as well. JAKKS lost the license to make WWE toys after 2010 (though it came back with smaller competitor Total Nonstop Action Wrestling), and Miley Cyrus seems to be going through typical teen angst and can't stop posing in front of a camera. Plus, there's not much growth in the industry -- the market researchers at NPD Group reported a 2% loss last year and only 0.4% growth the year before -- so JAKKS needs to continue turning out hits like its EyeClops night vision goggles. So far, however, it's been doing what it should in order to move up to the big leagues.

Silver: Disney (NYSE: DIS  )
Maybe theme parks and movies comes to mind when you hear the name Disney, but studio entertainment revenue plunged 19% in the latest quarter and theme parks needed assistance from a weak dollar overseas. Yet with its hand holding so many strings, it can weave sales in different ways and tie them all together. The Magic Kingdom's latest hit movie, "Wall-E," is expected to generate $30 billion in sales from toy robots to shoes from Crocs (Nasdaq: CROX  ) that leave caterpillar-tread marks.

While ESPN and the theme parks grabbed most of the earnings attention, Disney's comparatively small consumer products division -- though at $642 million it's bigger than all of JAKKS -- saw 20% growth.

And the gold goes to ...

Gold: Hasbro (NYSE: HAS  )
You learn from your mistakes, and if you're a champion you use those lessons to go on and win. That's the case with Hasbro, which is using its face first on Facebook to revive a number of family favorite games that will revive their brands.

Hasbro was slow to counter a ripoff -- but popular -- version of Scrabble on the social networking site and after suing the originators of the game, replaced it with a clunky version that upset users. It's already brought cell phone users popular versions of board games Scrabble, Yahtzee, and Monopoly, and along with these titles, Hasbro is looking to port Boggle and Battleship over to the networking site as well.

Still, the toy company has avoided much of the bad press many of its rivals have endured and has used a potentially disastrous social faux pas to revitalize other brands it owns. With TV and movie deals in the works for a number of its properties, and partnering with Marvel Entertainment (NYSE: MVL  ) to make action figures for some of the entertainment company's best movie characters, Hasbro stands on the tallest box to accept its award.

A few lead medallions
While not disqualified, let's give these two toy stories their appropriate lead medals.

  • Mattel overcame the lead recalls and design fiascos that bogged it down for much of last year, and just won a court decision giving it ownership of the popular Bratz designs. But its iconic Barbie line continues to falter, with global sales down 6% and company-wide profits that dropped 48% in the latest quarter. Still, the biggest toymaker gets points just for showing up.
  • RC2 (Nasdaq: RCRC  ) is another lead recall that has much improved its position since last year. It has settled its lawsuits, extended its popular "Thomas & Friends" licensing agreement, and made a few shrewd acquisitions. Yet it's still questionable whether the company can fully recover from its tainted toy incidents given its failure at redeeming itself when it handed out even more unsafe toys as an apology to parents.

Congratulations finalists, you've made the Romper Room crowd stand up and cheer.

Check out other gold metal winners:

CROCS is a Motley Fool Hidden Gems Pay Dirt selection. RC2 is a Motley Fool Hidden Gems pick. Marvel Entertainment, Hasbro, and Walt Disney are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Rich Duprey owns shares of JAKKS Pacific and Disney, but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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