Here's Why These Toymakers Might Kill Your Christmas Spirit
Zacks Investment Research | Dec 14, 2017 08:29PM ET
As Christmas is just around the corner, investors might take more interest in the toys and games space. The holiday season usually marks the most profitable time of the year for the industry, with the second half of the year accounting for two-thirds of net sales.
As per the latest report from The NPD Group, Inc. an American market research company, the U.S. toy industry saw a 3% rise in its dollar sales in the first nine months of 2017. As per a July report by the NPD Group, sales are estimated to grow approximately 4.5% in the full year. Also, the release of popular flicks like Star Wars: The Last Jedi is likely to fuel industry growth.
However, leading U.S. toymakers like Hasbro, Inc. (NASDAQ:HAS) , Mattel, Inc. (NASDAQ:MAT) and JAKKS Pacific, Inc. (NASDAQ:JAKK) do not conform to the overall rosy industry background. Here’s why —
Toy companies like Hasbro have been grappling with declining demand for traditional toys for quite some time now.
The recent Toys ‘R’ Us bankruptcy aggravated matters. The company saw a decline in quarterly revenues and operating profits in the third quarter. Hasbro had been selling roughly 9% of its total inventory at the chain. The bankruptcy filing could have left the company with $60 million worth of unsecured payments. In fact, it has disrupted Hasbro’s growth plans for the holiday and has even paused shipments for a short period. Resultantly, the company expects fourth-quarter revenue growth in the range of 4% to 7% year over year, lower than its earlier projections.
We note that, with a market capitalization of $11.94 billion, Hasbro is on investors’ radar owing to its size and liquidity. The company’s earnings estimate revisions clearly reflect the disappointment among investors regarding the stock’s prospects. Over the past 60 days, current-quarter and year earnings estimates have gone down 8.9% and 1.2%, respectively.
Further, shares of the company have underperformed the Zacks Investment Research
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