Retailers, consumers and prices
Tim Conder, an analyst with Wells Fargo Securities, said toy shares continue to offer the best “risk/reward” as those in his coverage, like Mattel, Hasbro and RC2 Corp, continue to gain relative market share.
“Despite on-going consolidation among retailers and investor concern about growing major retailer ‘clout’ via pricing pressure and private label toys, major toy manufacturers have gained share. Why?” Conder asked in his note.
The answer could be – ”(1) Financial staying power, (2) Uninterrupted supply chains while 2nd/3rd tier vendors had issues during the peak of the credit freeze, (3) Licensed/owned brands that major retailers need to draw consumers (e.g., Barbie, Transformers, Star Wars, Spiderman, Thomas & Friends, Sesame Street, John Deere), and (4) Dependable consistency to deliver globally as major retailers expand,” Conder said.
The maker of Barbie said its first-quarter loss widened and CEO Robert Eckert said Mattel would keep controlling costs as tough market conditions test the resilience of toy companies.
Modelworks, a company that makes models of anything from planes to action figures is expected to unveil its version of Madoff, an accused perpetrator of a $50 billion investment scam, at the 2009 Toy Fair in New York’s Jacob Javits Center, the Toy Industry Association said on its website.
Check out the Island of Misfit Toy Earnings.
Mattel bumped along like a train with square wheels in the fourth quarter, posting a 46 percent drop in earnings for the quarter that includes the key holiday selling season.
Sales fell 11 percent, a particularly bad sign given the idea that parents would sacrifice shopping for themselves in order to buy toys for their children during the holidays.
Granted, part of the sales decline was due to the rising dollar, which hurts the value of sales outside the United States.
But U.S. sales also fell 6 percent. And Barbie is really sagging, with a 21 percent drop in sales. Maybe her age is showing. She does hit 50 this year.
“Our business wasn’t immune from the deteriorating economic environment of 2008,” CEO Robert Eckert said in a statement.
Rival toymaker Hasbro will report next week. But at least it has that Monopoly money to cover any shortfalls.
Also in the basket:
Bharti Wal-Mart picks name for cash-and-carry stores
Tough times for luxury watches (WWD, subscription required)
Hasbro, the second-largest toymaker, thinks it has what cash-strapped shoppers need in 2009: A lineup of new card games priced at around $7.
They include Scrabble Slam and Monopoly Deal, which play off the original board games and aim to entertain stay-at-home consumers in a recession-mired economy.
A California judge ruled late Wednesday that Bratz owner MGA Entertainment should stop selling the dolls and banned it from using the toy’s name, handing rival and Barbie maker Mattel Inc its biggest victory yet in a years-long legal fight over the Bratz dolls, which pushed Barbie out of the limelight soon after their launch in 2001.
Check out the marketing power of Hannah Montana.
Watch out Barbie. Hannah is clawing her way up behind you. At least as far as girl’s toys are concerned.
According the National Retail Federation’s 2008 top toy survey, Hannah Montana has moved up four spots to the number two position for girls’ in the Top Toys survey, trailing on Mattel’s Barbie.
Toys based on the Disney character, who is played by Miley Cyrus, knocked those scrappy Bratz dolls out of the number two spot. Bratz fell all the way to number four behind just-plain-old, everyday, no-specific-name dolls.
As far as boys are concerned, the list is similar to last year, with video games in general topping the survey and the Nintendo Wii in the number two spot. Legos, cars and Transformers round out the top five.
While the weak economy is leading to expectations of a dismal holiday shopping season, parents could find some bargains in toys.
“The good news for parents is that many retailers are featuring toys as loss leaders this year, heavily discounting and promoting these items to bring shoppers into stores,” NRF President and CEO Tracy Mullin said.
Also in the basket:
CPI drops at record pace in October
BJ’s Wholesale quarterly profit jumps
Why Doesn’t Costco accept food stamps? (N.Y. Times City Room)
Check out the holiday cheer coming from Hasbro’s CEO.
Remember when everyone said luxury stocks were more immune to a recession? That was before the housing slump, the credit crisis and the meltdown on Wall Street. Now the Dow Jones Luxury Index is down 52 percent from a year ago.
Remember when food companies said they were a little less vulnerable to an economic downturn because people still have to eat? Well, people still need to eat, but lower-priced store brands have been taking market share and food shares, as demonstrated by the Standard & Poor’s Packaged Foods index falling 11 percent in the past three weeks.
Well, now the next test case might be the idea that people will still keep spending on toys for their children during Christmas.
“We still believe that Christmas will come for consumers and retailers this year and our retailers have agreed that toys and games are more recession resistant than other discretionary spending categories,” Hasbro CEO Brian Goldner said during a conference call with analysts.
Hasbro beat analysts quarterly profit estimates, while higher costs caused Mattel to miss.
But what kind of Christmas will it be? Christmas came for the Cratchits in “A Christmas Carol,” but while it was full of good feeling and cheer, it was a tad light on presents, at least before Scrooge had his epiphany.
Will Christmas for toymakers be commercial, or Dickensian?
Also in the basket:
U.N. agency says crisis to cost 20 million jobs
Circuit City weighs broad cuts (WSJ, subscription required)
Adrenalina bids for PacSun (WWD, subscription required)
Elmo Live is Fisher-Price’s latest version of the Sesame Street fixture, after Tickle Me Elmo in 1996 and TMX Elmo in 2006. Fisher-Price is a unit of top U.S. toymaker Mattel Inc.
If the holiday season is around the corner (or even a little farther away), then it is that time of the year again — major toy retailers, childrens’ magazines and guides announce “hot” lists, predicting which toys and games will likely fly off store shelves during the holiday shopping period.
According to Toy Wishes magazine, girls who are 6 years old or older are likely to go after the Bratz “Girls Really Rock” line of dolls this time around.