A Tale of Two Toymakers: Will Hasbro and Mattel Go to Infinity and Beyond This Year?

Yesterday, the Hot Wheels and Barbie toy manufacturer Mattel, Inc. (MAT) reported third quarter earnings. The company surpassed expectations on both its Q3 EPS and revenue reports and reaffirmed FY guidance of EPS $1.35-$1.45 vs FactSet $1.44. Net sales declined 4% primarily due to the comparison to the success of the Barbie movie, in the prior year quarter. Gross margins increased to 53.1%, which were driven by supply chain efficiencies, cost savings from its Optimizing for Profitable Growth program, favorable foreign exchange and cost deflation.

As it relates to Mattel’s outlook, the company expects net sales in 2024 to be comparable to slightly down, with growth expected in the fourth quarter, and full year adjusted EBITDA and EPS to be within the previously provided guidance ranges. Mattel expects to gain market share in Q4 and full year and believes the toy industry will return to growth and continue to grow over the long term, with strong industry fundamentals.

Shares of Mattel have been trading up on the day with an increase of around 4%.

Rival toymaker Hasbro (HAS) who announced its Q3 financials today, reported EPS of $1.73 vs FactSet 1.29 however, the Street reacted more to its report of a 15% decline in revenue and the lowering of sales guidance for its consumer products. Despite the revenue miss, the company saw a significant moderation in the decline compared to the first half, while achieving the highest operating margin for the segment in three years. Consumer Product Licensing was a bright spot, driven by My Little Pony trading cards and contributed to the operating margin expansion.

Besides lowering its consumer products sales guidance, Hasbro’s outlook on adjusted EBITDA was reaffirmed in the range of $975M to $1,025M and expects 2024 ending cash to be above year-end 2023 levels. The CFO vowed to finish the year with improved profitability which may see a slight boost from its decision to lay off about 100 employees as part of its restructuring plan as they consider to potentially move to Boston.

Shares of Hasbro have traded down today as the stock is down around 5%.