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Is This Why Mattel Stock Was Almost 8% Higher Tuesday Morning?

By Daniel Miller – Updated Apr 17, 2019 at 10:26AM

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It's possible that a Toys R Us revival gaining momentum has investors feeling optimistic.

What happened?

Shares of Mattel (MAT 1.01%), a global leader in the manufacture and marketing of toys -- with brands that include Barbie and Hot Wheels -- were up 7.6% as of 10:46 a.m. EST Tuesday as a Toys R Us revival gains momentum.

So what

The Toys R Us bankruptcy shocked the industry as manufacturers such as Mattel and rival Hasbro (HAS -0.69%) lost hundreds of millions of dollars in revenue, and were then hit with a double whammy when they had to sell their retail inventory into the market at substantial discounts.

That made 2018 a rough year for toymakers. In fact, while Mattel has shown the worst is behind it, other manufacturers are still struggling

A Barbie doll play set with outdoor setting.

Barbie could be spending the next holiday season back in her old neighborhood, Toys R Us. Image source: Mattel.

But toymakers are starting 2019 in a better inventory position and are more prepared to move on from the Toys R Us debacle. There's also reason for hope as that chain's comeback is gaining some momentum. Toys R Us will emerge with new ownership, and the new company, Tru Brands, says it plans to launch a "newly imagined" omnichannel retail experience in the U.S. aimed at the next holiday season.

Check out the latest Mattel earnings call transcript.

Now what

Investors would initially think that the revival of Toys R Us in one form or another would be a positive. But the hole left by its departure was quickly filled by companies such as Target, Walmart, and Amazon eager to gobble up shares of the U.S. toy market. Essentially, whether this revival helps Mattel will be determined by how successful Tru Brands is in turning its pop-up shops or retail stores into more-interactive destinations rather than only places that sell toys. For investors, it's simple: Toys R Us 2.0 can't hurt financial results in the near term -- and after a rough 2018, that's good enough.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel Miller has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Hasbro. The Motley Fool is short shares of Hasbro. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Mattel, Inc. Stock Quote
Mattel, Inc.
MAT
$18.94 (1.01%) $0.19
Walmart Stock Quote
Walmart
WMT
$129.70 (-1.93%) $-2.55
Target Corporation Stock Quote
Target Corporation
TGT
$148.39 (-2.24%) $-3.40
Hasbro, Inc. Stock Quote
Hasbro, Inc.
HAS
$67.42 (-0.69%) $0.47
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$113.00 (-1.57%) $-1.80

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