This Toy Maker is Up for a Turnaround

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

Toy companies have been facing a difficult time as the peak holiday season does not look as bright as it used to be. The prevailing economic uncertainty has been taking a toll on the toy makers’ results for quite some time now. However, they are not ready give up. Hence, the industry players are up for a number of innovations to lure customers.

Hasbro (NASDAQ: HAS), an entertainment provider with a wide range of branded games in its portfolio, has been planning a number of interesting moves since the game maker’s depressing revenue calls for the same. Its second quarter results were not very interesting, with an 11% decline in its top line.

On the other hand, the company’s arch-rival Mattel (NASDAQ: MAT) had posted better results with a 14% increase in its revenue. All thanks to its higher product prices coupled with a number of new products.

The Background…

Revenue growth of both the companies, in the last one year, clearly shows the power of innovation as depicted in the chart below:

<img src="http://media.ycharts.com/charts/17a634d1a5aa5b9093e6f8de1b030660.png" />

HAS Revenue Growth data by YCharts

Revenue growth for Mattel has been almost flat, mainly because of the problems faced by the industry in general. However, it has managed to perform well recently owing to its various strategies such as using popular movies to promote its products.

The top line performances of the two players were clearly reflected in its stock price growth for the same period.

<img src="http://media.ycharts.com/charts/d201508bed8d0301066681f312091ac2.png" />

HAS data by YCharts

Nonetheless, Hasbro has finally planned its way out of the problem of a continuous decline in revenue and lower return to its investors. It is launching a new set of games this month in collaboration with Zynga (NASDAQ: ZNGA), a developer of social games. It will be using Zynga’s gaming brands such as FarmVille and CityVille to bring in a new experience to the gamers. It plans to bring these to life by giving people an opportunity to play games in real time with friends, family and other unknown players.

The deal looks like an interesting one. Firstly, online social gaming has been quite attractive to the customers. Secondly, the gaming brands of Zynga are quite popular on Facebook, attracting millions of users. In fact, Zynga has been trying to lure more customers by innovating on different games including new versions of its older games such as FarmVille 2. The second version of FarmVille has recently been up on Facebook with 7.5 million players checking the game on a daily basis. The success of FarmVille 2 has made Zynga release CityVille 2 which will have even better graphics.

More Deals in the Kitty

Hasbro’s strategic initiatives do not stop here. It has more to offer. It has entered into a deal with Volumique, a French company which provides innovative technologies, to use its technology into its edition of zAPPed games with its first product being BATTLESHIP zAPPed.

Hasbro has also launched an electronic pet called Furby and many other applications to board-games to lure its lost customers. In fact, Furby was a big hit when it was first launched, more than a decade ago, setting the expectations higher this time.

The Games category has been dull recently and the company plans to turnaround this segment soon with its efforts.

The Bottom Line

The toy maker is indeed making some decent moves which have the potential to drive its performance north. Its host of new products coupled with expansion efforts looks quite interesting. Moreover, it has been eying the right kind of products as per the current customer interests. Its new products in the girls’ toys segment is another strong weapon in its arsenal since girls’ toys have been faring well recently. Overall, Hasbro looks like a potential performer in the months to come.


justhimanshu has no positions in the stocks mentioned above. The Motley Fool owns shares of Hasbro and Mattel. Motley Fool newsletter services recommend Hasbro and Mattel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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