Mattel, Inc. (MAT), Hasbro, Inc. (HAS) & JAKKS Pacific, Inc. (JAKK): Are There Opportunities in the Toy Business?

I am concerned about Hasbro, Inc. (NASDAQ:HAS)’s high exposure to Europe, however, a region that accounts for 28% of the company’s revenues. Sales growth in the Euro-zone has been decelerating in the last couple of quarters.

JAKKS Pacific, Inc. (NASDAQ:JAKK)

JAKKS Pacific
designs, produces, markets and distributes toys, pet toys, consumables, electronics, kids indoor and outdoor furniture, and other consumer related products.

The company first-quarter results were very disappointing in spite of a significant 6.4% growth in revenue. Driven by a drop in sales and a margin contraction, the adjusted loss of $1.23 per share was considerably wider than the company’s $0.59 loss a year ago.

The “Monsuno” line, one of the company’s major products, experienced a radical decline in its demand during the quarter. “Winx Club,” another major brand for the company, suffered the same destiny. The increase in the company’s inventories during the last year confirms the low demand that JAKKS Pacific, Inc. (NASDAQ:JAKK) is experiencing.

JAKKS Pacific, Inc. (NASDAQ:JAKK) is being affected by a change in the pattern of kids play, and consequently its key products are lacking demand. The company is aware of this situation and is developing a breakthrough product line called “DreamPlay,” which will be launched this fall. The impact of the new product line could be rather low, however, and will not materialize until the fourth quarter regardless. JAKKS Pacific will not launch any significant new products besides DreamPlay in the near term, so there’s no reason to expect higher returns anytime soon.

Bottom line

Mattel, Inc. (NASDAQ:MAT) is a solid company. Its cost-saving efforts, along with its license partnerships and plans to expand abroad, make it worth the price to be in my portfolio.

Hasbro, Inc. (NASDAQ:HAS)’s strong product line-up and operating margin increase give the company a good outlook for the future. Its strategy to expand into the digital world seems more solid than its competitors’ and will reinforce the company’s position in the long run.

Due to the seasonality of the industry and the situation that JAKKS Pacific, Inc. (NASDAQ:JAKK) currently faces, I doubt that that the company will bring good results for next quarter. Hence, I would sell JAKKS Pacific, Inc. (NASDAQ:JAKK).

The article Are There Opportunities in the Toy Business? originally appeared on Fool.com.

Damian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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