Toymakers Hasbro, Mattel slump after sounding alarm over holiday spending

By Savyata Mishra

(Reuters) -Toymaker Hasbro (NASDAQ:) disappointed investors with its results on Thursday, joining Barbie-maker Mattel (NASDAQ:) in warning of a weak holiday season and indicating that consumers are being frugal heading into the most important period for retailers.

Demand across the toy industry has weakened since a pandemic surge as consumers re-allocate their budget to cover for household essentials amid rising prices and higher borrowing costs.

“Hasbro slashing its outlook and Mattel maintaining its guidance even after the blockbuster success of “Barbie” movie are clear signs of weakening demand,” Insider Intelligence analyst Zak Stambor said.

Hasbro cut its 2023 revenue forecast for the second time this year to a 13%-15% slide, from a prior view of a 3%-6% decline. Shares of Hasbro sank 13%, while Mattel’s stock fell 10%.

“Holiday is going to be unpredictable,” CEO Chris Cocks told Reuters, adding that the overall toy market was down around 8% to 10% going into October.

CFO Gina Goetter said retailers will plan inventory cautiously, which would impact the holiday order patterns.

“The holiday demand is going to come, but it’s going to be late and very deal reliant,” Cocks said.

The Monopoly maker’s third-quarter revenue and profit also missed market expectations, with revenue from its core toy business dropping 18% as shoppers cut back on non-essential spending.

Its digital and licensed gaming revenue, however, grew 40% on strong demand for its “Monopoly Go” and “Baldur’s Gate III” games.

A day ago, rival Mattel kept its annual net sales forecast intact despite topping third quarter estimates.

Hasbro, which makes Transformers action figures, forecast its toy business to decline in mid- to high-teens for the year compared with mid-single digits decline it forecast earlier.

Quarterly net revenue fell to $1.50 billion, missing estimates of $1.64 billion, according to LSEG data. Excluding certain items, it earned $1.64 per share, below expectations of $1.70.