Please ensure Javascript is enabled for purposes of website accessibility

Can Disney Help Hasbro Solve Its Girl Problem?

By Rich Duprey – Mar 1, 2016 at 5:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The toymaker may be getting a big boost from a pair of sisters and some royalty.

Hasbro might not be able to ride off into the sunset on just its My Little Pony brand, but with a powerhouse Disney portfolio behind it, the toymaker's girl's division could start to show some real muscle.

Hasbro (HAS -0.59%) has a girl problem, and it's not just the hubbub over the lack of a Rey action figure in the toymaker's Star Wars: The Force Awakens playsets. It also has to do with its Furby toys, Equestria Girls, and across most the business segment.

While Hasbro saw revenue rise for core brands like My Little Pony, it was not nearly enough to offset the plunge it suffered elsewhere, and the segment's revenue tumbled 17% in the fourth quarter. It was down 22% for the year, and even absent foreign currency exchange rates, revenue was down 13% from 2014.

The toymaker is scrambling to recover. While there are times when Hasbro's different segments seem to take turns as which one will lead -- in 2013, for example, the girls segment enjoyed a 26% surge in revenue compared to a 22% decline in boys, while back in 2010 its preschool division was the predominant driver of sales with 13% growth --  by and large the toymaker's boys unit carries most of the load.

Most of the time, when the boys segment isn't performing well, it's because there isn't a Transformers movie at the box office. That megafranchise from Paramount Pictures has generated some $3.8 billion in global receipts over the life of four movies and is a money-printing machine for Hasbro because of the toy sales it elicits. But in between releases, it can often be an arid wasteland for Hasbro's boys division despite the popularity of other toys like Nerf, Beyblades, and more.

Last November it was rumored Hasbro was in talks with rival Mattel (MAT 0.44%) to merge the two toymakers together, with the thinking being Mattel's Barbie and American Girl dolls could plug a big hole in Hasbro's toy box. As those talks don't seem to be going anywhere, Hasbro seemingly has high hopes the release of the latest installment of Disney's (DIS 1.60%) Star Wars franchise will make up the difference.

It's the first movie from the saga in a decade so not only should it keep the boys division in hyperdrive, but it also has the potential to boost the girls category, too, since it features a strong female lead. The supposed desire of the producers to keep the plot line under wraps, however, kept Hasbro from releasing the Rey character's action figure ahead of the movie's debut, and it suffered significant blowback on social media as a result.

But even more than just Star Wars, Hasbro is pinning its hopes on riding Disney's coattails generally to shore up the weakness in its girls segment.

The toymaker was able to wrest from Mattel the development and marketing rights for two other big Disney franchises, Frozen and its Princess dolls. It officially took over those properties on Jan. 1 and wasted no time shipping toys to retailers immediately (actually a little early) even though a sequel to the story about sisters Anna and Elsa isn't due out till sometime next year. Hasbro wants to milk every ounce of opportunity it can from its relationship with the House of Mouse.

In fact, it could be this partnership that solves Hasbro's girl problem. When Frozen was with Mattel, it essentially cannibalized sales of the toy company's iconic Barbie and American Girl dolls. Revenue for the former shriveled 16% the year the movie was released while the latter slid 2% as the sisters became the must-have dolls for Christmas that year.

Although Barbie reclaimed her crown last year as no Frozen sequel was in theaters, Mattel investors should worry about what her sales will be like when Elsa and Anna come to town again next year. Yet it also suggests Hasbro will be able to fill its own void with the sisters.

The toymaker is also pushing forward with its own movies that should appeal to girls based on its My Little Pony brand, a seemingly better opportunity to capitalize on its toy portfolio than the failed Battleship movie and maybe even the planned superhero mashup it's scheduling.

Hasbro's toy segments seem to cycle through periods of growth and decline, though the boys division generally has a fairly muscular performance regardless. But now, with help from Disney, it has female toys on store shelves from Star Wars, Frozen, and the various Princesses, and soon its own My Little Pony will join the lineup. That's a pretty powerful brand portfolio that just might not only whip Hasbro's boys toys, but could diminish Mattel's girl power, too.

Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Hasbro and Walt Disney. 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.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.