Is Hasbro Racing Ahead Of Mattel?

Author's Avatar
Oct 30, 2014

Shares of Hasbro (HAS, Financial) are in an uptrend. They have surged 22.2% in the last year, whereas peer Mattel (MAT, Financial) has registered a decline of 30.8% during the same time period. Hasbro has been able to do well despite unfavorable macroeconomic factors that are keeping customers away from toy stores. Lower consumer spending in the U.S., people’s unwillingness to spend on nonessential items and a significant shift in children’s tastes and preferences to electronic gadgets have made lives difficult for toymakers.

However, Hasbro is an exception. It continues to perform well, which was once again reflected in its third-quarter results. The numbers were ahead of Street’s estimates, enabling its share price to inch up slightly. Let’s check it out.

The favorable numbers

Revenue jumped 7% to $1.47 billion over last year’s quarter. Also, it was able to meet the analysts’ estimates. One of the key reasons for this performance was the release of new movies that boosted demand for its related toys. For instance, the release of Transformers, Amazing Spiderman and Captain America generated demand for its toys, thereby boosting the top line.

Going by the segments, the Boys category was an outperformer with an increase of 22% in sales. Thus, revenue from this segment stood at $478.5 million. The growth was driven by higher demand for products such as Star Wars, Nerf, Transformers and Marvel.

Even the Girls category surged higher with a 5% increase in sales, clocking in at $407.7 million. New products such as the Play-Doh and increased demand for existing products such as Nerf Rebelle, My Little Pony, etc., drove revenue higher. However, the Pre-School category registered a drop of 7% in sales due to weakness in the Sesame Street and Playskool products.

Earnings for the quarter rose to $1.46 per share, as compared to $1.31 per share in the year-ago quarter. Hasbro’s restructuring efforts and cost saving initiatives has been beneficial for the company. The cost saving program is expected to save $100 million by the end of next year.

Digging deeper

Geographically, both the U.S. and the International segments performed well. Sales from the U.S. and Canada increased 4% as growth in the Boys segment drove revenue higher. The International segment grew 11% as demand in the regions such as Asia Pacific, Latin America and Europe increased.

Some favorable deals

Hasbro is working hard to overcome competition from Mattel. It recently cracked a deal with Disney for its movie “Frozen,” and Princess such as Cinderella. Further, Mattel lost the partnership with Disney and from spring 2016 the rights will be transferred to Hasbro. This deal should help Hasbro to a great extent.

In fact, the unfavorable effects of this new deal are already evident in Mattel’s results. Its recent quarter was a lackluster one, wherein it missed on both the top line and the bottom line expectations and demand for its products is lower.

Hasbro has also entered into a deal with Discovery Communications (DISCK, Financial), which would help the toy manufacturer to serve people during primetime on the silver screen. Also, it would cater to children in the afternoon. This would help the company cater to small-screen customers also.

Finally

Hasbro is doing a commendable job of attracting customers to its products. Through various strategic efforts such as new joint venture deals, new products and cost-cutting initiatives, Hasbro has been able to win investors’ confidence. This is pretty much evident from its recent quarter performance as well as the stock price appreciation in the last one year. With new deals around the corner, this company seems to take off to new highs.