The toy industry has evolved over the years with the changing tastes and preferences of people. For instance, children now prefer to play with electronic toys and gadgets such as tablets instead of physical toys. The toy manufacturer Hasbro (HAS) posted its first quarter results recently. Although the numbers were mixed, its share price moved north after the announcement.
Details of the Quarter
Driven by the great performance of the Girls segment, revenue stood at $680 million, an increase of 2% over the prior year. Sales of Girls’ toys jumped 21% over last year. This increase was mainly because of strong demand for My Little Pony toys as well as Nerf Rebelle.
My Little Pony targets little girls and includes a TV series which is based on its characters. Therefore, children can relate to its stories and hence become increasingly interested in its toys as well as its accessories. Also, demand for Nerf Rebelle increased, which is a bow-and-arrow based toy, mainly due to the release of the Hunger Games movie series.
Although revenue was slightly below the estimates, the bottom line was way ahead of analysts’ expectations. Earnings for the quarter stood at $0.14 per share, against the estimate of $0.10 per share.
On the other hand, rival Mattel (MAT)'s first quarter results failed to meet analysts’ estimates on both lines. Its revenue dropped 5% as against last year’s quarter, clocking $946.2 million, whereas analysts were expecting it to be $947.6 million. Weakness in Barbie sales pushed revenue down. However, sales of Hot Wheels and American Girl toys came as a relief for the retailer. Also, revenue from the U.S. market declined 2% along with a decrease of 7% in the international market. This is in sharp contrast with that of Hasbro, which witnessed an increase of 5% in its international sales.
However, even Mattel has resorted to an acquisition strategy to strengthen its business. It announced its acquisition of MEGA Brands last month. The Mega Brands’ acquisition will help Mattel expand its position in art & craft category as well as construction toys category.
Positives to Be Considered
Hasbro’s future looks bright because of its well-formulated strategies which are expected to bear fruit. For instance, the toy maker acquired Backflip Studios in July last year. This buyout will help the company strengthen its digital gaming expertise since Backflip Studios creates games for mobile devices. Moreover, with the growing popularity of Smartphones and mobile gaming, this deal should definitely benefit the acquirer.
Hasbro’s boy toys segment also performed well with sales growth of 2% over last year. Boys segment, which makes most of Hasbro’s revenue, is expected to grow with the release of movies such as Spider-Man and Transformers.
Summing It Up
Along with a great quarter, the toy maker has a number of strategies to combat competition and boost its revenue. New product introductions, growth through acquisition and providing toys based on movies add to the retailer’s strengths. Moreover, it has easily been able to outpace its rival Mattel in its recent quarter earnings. Therefore, this company deserves a look.