Toy makers Hasbro and Mattel are facing challenges as they anticipate a slowdown in sales during the fourth quarter. Hasbro's stock dropped over 10% and Mattel's slid over 7% following their separate third-quarter earnings reports. Both companies cited consumers cutting back on spending and inflation pressures as factors that could impact sales during the upcoming holiday season. Toys and games, which are products both companies are known for, may be affected as consumers become more cautious with their spending.
Hasbro, known for iconic brands like Play-Doh and Monopoly, revised its guidance for the full year, projecting a 13% to 15% revenue decline. This is worse than its previous forecast of a 3% to 6% drop in revenue. The company attributed the revised guidance to a "softer toy outlook." CEO Chris Cocks expressed uncertainty about the market's direction during the holiday season.
Mattel also spooked Wall Street with its implied fourth-quarter guidance on toy sales, despite posting strong third-quarter results. Analysts at Citi Research noted that the company's weaker-than-expected implied guide suggested lackluster performance for Mattel's business outside of Barbie products.
While Mattel exceeded Wall Street expectations for the third quarter, Hasbro fell short of analyst estimates. Hasbro's adjusted earnings per share of $1.64 missed expectations of $1.70 a share, and its revenue of $1.5 billion fell short of an estimate of $1.64 billion. Hasbro's revenue for the quarter declined by 10% compared to the same period last year, primarily due to decreases in its consumer and entertainment segments.
Hasbro's consumer segment sales, which include popular toy brands like Nerf, My Little Pony, and Transformers, fell by 18%. The company attributed this decline to "exited licenses and softer category trends." Hasbro's entertainment segment revenue also experienced a significant drop of 42% year over year, largely due to strikes by writers and actors. Earlier this year, Hasbro announced its plans to sell its film and TV business eOne, which includes Peppa Pig, to Lionsgate for $500 million.
Overall, both Hasbro and Mattel are bracing for a challenging fourth quarter as consumers tighten their belts and inflation puts pressure on budgets. The companies are closely monitoring the market and remain uncertain about how the holiday season will unfold.