Hasbro's market cap value as of 11/22/2020, stands at $12.75 billion,while Mattels’ is only at $5.23 billion.
The history of Hasbro
To better understand Hasbro and Mattel and to determine which one has the leading edge in 2020, it is necessary to delve into the history of the two companies. “Hasbro, originally known as the Hassenfeld Brothers, began in 1923 (over 93 years ago) selling textile remnants, which quickly expanded into pencils and pencil cases”.[1]
Small beginnings
It started as a family owned company, headed by three brothers, Herman, Hillel, and Henry Hassenfield. Over time, the Hassenfield brothers shifted production of pencils in house to cut costs, and the savings generated by this action led to a revenue base, which made it possible for them to expand into other areas in the 40’s. During this time, the Hassenfield brothers began making toys, starting with doctor and nurse kits as well as modeling clay.[2]
G.I. Joe is born
The Hassenfield brothers found their first hit toy with Mr. Potato Head, which they acquired from George Lerner, the toys original creator, and in 1964, the company was approached to make dolls for a military themed TV show, but instead decided to manufacture their own military themed dolls independently, and G.I. Joe was born.[3]
It’s not a doll, it’s an action figure!
“Hasbro (still Hassenfeld Brothers at the time) is credited with coining the term action figure as they sought to market the new toys to boys. They wanted to produce dolls for boys, but change the designation so they would be easier for boys to accept. Thus, the action figure was born and G.I. Joe accounted for two-thirds of Hassenfeld’s total sales between 1964 and 1965. This changed everything”.[4]
In 1968 the company renamed itself Hasbro Industries, and over time Transformers, My Little Pony, Tonka, and other brands aligned themselves with Hasbro, allowing them to expand their Empire.[5]
Mattel comes along
Mattel came along in 1945, at the time known as Mattel Creations. The name Mattel is a splice between its founders' names, Harold “Matt” Matson and Elliot Handler. At first Mattel only sold picture frames, but later on started selling dollhouse furniture, which marked their first foray into the toy industry.[6] Mattel’s first hit was a ukulele toy called “Uke-A-Doodle”, and later on they launched a year-round sponsorship of the Mickey Mouse club in 1955. Just as Hasbro had G.I. Joe, Mattel found their mainstream success with Barbie, which launched in 1959. Mattel’s toy line continued to grow, starting at first with Barbie and Chatty-Cathy and later expanding to include Hot Wheels, Fisher-Price, and American Girl.[7]
Finances in flux
The recent financial history of Mattel and Hasbro has been in flux. From 2014 to 2018 Hasbro saw a general upward trend in its stock prices, while Mattel went from $43 per share in July 2013 to $16.58 a share by July of 2018.[8]
Toys ‘R’ Us closes
Toys ‘R’ Us’s closure has thrown a wrench into Hasbro and Mattel’s plans. It appears that COVID, while far deadlier to humans, was less deadly to Hasbro and Mattel than the bankruptcy of the toy retail giant Toys ‘R’ Us.When Toys ‘R’ Us went bankrupt in 2018, this left both of the toy makers stocks in the red, with Hasbro doing slightly better than Mattel.[9] In 2019, Hasbroblamed their losses on the bankruptcy of Toys ‘R’ Us. During this period of time, Mattel pulled ahead into the lead significantly. Mattel’s Q4 results were better relative to expectations according to Drew Crum, analyst at Stifel, who wrote in a research note -- February 2019.[10]
Mattel pulls ahead
In February of 2019, Mattel’s stocks outpaced Hasbro’s, even as industry-wide toy sales had fallen by 2 percent in 2018. Walmart, Target, and other retail stores expanded their toy sections, but this still wasn’t enough to account for Toys ‘R’ Us’s closure.[11] Analysts predicted a better future for Mattel than Hasbro in this trying time: ““If you took the logo off the top, Hasbro’s earnings read like a company that was restructuring and Mattel read like a growth company,” said Gerrick Johnson, analyst at BMO Capital Markets.”[12]
Stores close, Mattel fares better
While Mattel did better than Hasbro, it still was not left unscathed by Toys ‘R’ Us’s closure, its revenue falling by 5.4 percent in the fourth quarter to $1.52 billion. However, it did significantly better than analysts projected, seeing as they expected Mattel to drop to $1.44 billion.[13] Hasbro’s revenue on the other hand dropped 13 percent to $1.39 billion, doing worse than analysts expected.[14]
Mattel lays of 2,200 employees
Mattel seemed to come out of this round with a fighting spirit, implementing a two-step strategy to cut $650 million in costs by laying off 2,200 workers and closing down its New York office. This will save the company money, but at the cost of employee livelihood.[15]
Second quarter results
In the second quarter of 2020 Mattel did better than what analysts had projected, but they still lost earnings and revenue because of the COVID-19 pandemic. Mattel still outpaced analysts expectations, while Hasbro continued to sink, faring worse than Mattel.[16]
Toy industry sales grow 9%
This occurred in contrast to rising toy industry sales which grew 9 percent globally in this first half of 2020, perhaps because of children stuck at home during quarantine, but Hasbro and Mattel still suffered losses during this time period, most likely due to pandemic-related store closures and production issues.[17]
Hasbro loses 29% in revenue
During the Second quarter of 2020, Hasbro suffered a traumatic loss, their revenue declining by a whopping 29 percent to only $860 million. This happened despite the popularity of several toys and games manufactured by Hasbro such as Jenga, Connect 4, and Battleship. Their losses can be attributed to issues with supply chains and store closures.[18]
Both companies survive COVID
Mattel and Hasbro both fared significantly better in quarter three of this year, and miraculously, analysts described Hasbro’s long-term outlook as being better than Mattel’s, while both companies did very well: “Hasbro's long-term outlook is stronger according to analysts, with a "Strong Buy" rating based upon seven "Buy" and just one "Hold" recommendation.”[19]
Best Selling Toys
Both toy giants are in control of various top selling toys, with Hasbro connected to the “Littlest pet shop” brand, including both toys and video games and Mattel in control of brands such as Barbie, Polly Pocket, Hot Wheels, and of course their Jurassic World contract. Some of Hasbro’s best selling toys include Transformers, Beyblade and Beyblade accessories, Hasbro’s top selling toy on amazon being a box to hold Beyblade’s. While both brands are strong, it seems that Hasbro has connected more of their brands with electronic media, such as their G.I. Joe mobile app, giving them a definite edge over Mattel.
Market Cap Valuation Figures
Hasbro also has a significantly higher market cap value as of 11/22/2020, standing at 12.75 billion,[20] while Mattels’ is only at 5.23 billion.[21] Hasbro also has a higher enterprise value, at 16.89 billion while Mattels’ rests at 8.37 billion. Historically, Hasbro has continued to maintain a larger market cap, even as it went through a significant dip when the pandemic started.[22] Mattel’s Market cap has begun to increase recently but it still remains lower than Hasbro’s by a wide margin.[23]
The real threat to Hasbro and Mattel
Both toymakers have long and impressive service records, and both underwent hard times because of Toys ‘R’ Us’s closure and of course the pandemic, but fortunately, they are financially very stable and here to stay, with Hasbro managing to do better than Mattel. Hasbro and Mattel have had long competitive histories, and tend to stay focused on each other, both controlling multiple popular toy and game brands, but Lego, on the other hand, has been steadily advancing to outpace both Hasbro and Mattel for years. “The Danish toy maker said that sales jumped 14% in the first half of 2020 compared to the same period last year. CEO Niels Christiansen pointed to investments in e-commerce as crucial during a period in which retail stores were shut.”[24] So it seems that While Toys ‘R’ Us and the pandemic are mostly to blame for the two toy-makers losses, they may soon be facing a new opponent that climbs surely and steadily, brick by brick.
Another emerging competitor for Mattel
A manufacturer of children's toys and entertainment goods, MGA Entertainment Inc. (Micro-Games America Entertainment), was founded by Isaac Larian and his brother, Farhad Larian, in 1979. MGA Entertainment has been successful with it's Bratz fashion dolls, Baby Born, L.O.L. Surprise! Num Noms and Surprise Poopsie Slime. MGA owns Little Tikes as well. We will write more about MGA Entertainment in the coming months.
Hasbro Is Ahead of Mattel as Toys Go Digital (12/09/2020)
Notwithstanding the impressive comeback that Mattel has made after facing one of its biggest crises, Hasbro is “further along in its transition from a toy company to a toy and entertainment company than Mattel,” according to analyst Shawn Collins who credits Hasbro for incorporating its brand into movies and games.
