Toymakers report a depressing holiday season

Barbie and Hot Wheels saw sales declines in the fourth quarter. Mattel and Hasbro face a tough road ahead.

By Jonathan Berr Feb 1, 2013 1:10PM
Image: Teddy Bear (Fancy/Veer/Corbis/Corbis)Mattel (MAT) reported disappointing fourth-quarter numbers Friday, days after rival Hasbro (HAS) warned Wall Street that its earnings would fall short of analysts' expectations. This is especially troublesome for investors, since toymakers earn most of their profits during the holiday season.

Mattel reported that sales of Barbie-branded products, a big money maker, fell 4% in the quarter. The Wheels business, which include Hot Wheels, Matchbox and Tyco, reported a 1% decline in sales. CEO Brian Stockton said in the earnings release that the results were particularly gratifying given the current economic climate. For a full breakdown of the numbers, click here.

Hasbro, home of Monopoly and Nerf, plans to cut about 10% of its 5,500-person workforce and consolidate facilities to reduce costs. As the Associated Press reported, CEO Brian Goldner expects to deliver $100 million in annual cost savings by 2015.

Retailers such as Wal-Mart (WMT) and Toys "R" Us enhanced their layaway services during the holidays to encourage people to buy more toys, but as the AP noted, that may have led to some items being scarce later on.

The industry has a tough road ahead. Consumer confidence dropped to its lowest level in January in more than a year. The bright side to this is that parents searching for the perfect birthday present over the next few months will probably find plenty of deals.

--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr


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