Parents rejoice: Bratz dolls are going the way of the hula hoop!
The sexed up Barbies on collagen injections that have been the subject of a 9-figure lawsuit involving Mattel (NYSE: MAT) and MGA Entertainment are not expected to be the hit this holiday season that they have been in recent years.
The Wall Street Journalreports (subscription required) that Target (NYSE: TGT) will be slashing Bratz-devoted shelf space by 50%, and annual sales of the dolls are expected to fall 25% to $300 million. Wal-Mart (NSYE: WMT) has also slashed its Bratz orders and many retailers are offering steep discounts on the dolls, indicative of an inventory glut.
The decline of Bratz is bad news for Mattel, which is locked in litigation over rights to a brand that appears to be rapidly declining in value.
In addition, Bratz's risque image is causing problems for the company. Scholastic (NASDAQ: SCHL) has pulled Bratz books from its roster after parents and psychologists complained that the dolls modeled "precocious sexuality."
Mattel (NYSE: MAT) scored a big victory when it sued MGA Entertainment over the origin of the wildly popular Bratz dolls, and won. But it looks like the victory won't be as big as the parent company of Barbie would like.
Mattel was seeking $1.8 billion in damages but, on Tuesday, a jury awarded Mattel just $100 million in damages, but The Wall Street Journalexplains that that award "could be further reduced by U.S. District Judge Stephen G. Larson because it contains duplicate damages for the same offense, according to Thomas Nolan, an attorney for MGA." Still to be determined is who will have the right to continue marketing the Bratz brand.
This is a big loss for Mattel. The company spent millions pursuing the litigation -- the amount was large enough that Mattel said it materially affected earnings, and Mattel is a $30 billion company.
This has definitely been one of the more entertaining lawsuits in business news of late and it looks like there will be a few more rounds to go, with MGA Entertainment planning to file an appeal.
4Kids Entertainment Inc. (NYSE: KDE), a licensing operation meant to target kids with various toys and potential fads, suffered through a terrible second quarter. The top line increased 37% to $16.5 million. Sounds pretty good so far, right? Yeah, then we get to the bottom line. The net loss was $0.42 per share. This compares to a net loss of $0.17 per share in the previous year's Q2. And what did Wall Street think the company was going to lose? About $0.23 per share, according to Earnings.com. I'd call that a rather bad shortfall.
The press release promoted the fact that the Chaotic trading-card asset is performing up to expectations. 4Kids is very hopeful that it can create momentum behind the cards and eventually turn them into another Pokemon or Yu-Gi-Oh! franchise. Maybe management can, maybe it can't. That's the problem with 4Kids. It's difficult to retain a desire to allocate investment funds into this stock since you can never really tell what product line is eventually going to win out for the company. It's a constant exercise in speculation. For instance, Teenage Mutant Ninja Turtles was weak this quarter compared to the year-ago period. Who knows if the property will be hot again two quarters from now. Going with a Hasbro, Inc. (NYSE: HAS), a Mattel, Inc. (NYSE: MAT), or a JAKKS Pacific (NASDAQ: JAKK) would probably make for safer sledding.
4Kids' stock is up slightly as I write, and it isn't far from its 52-week low. It isn't cheap, and it isn't a buy. This is the kind of stock you would definitely need to see some momentum strength in before buying. Otherwise, you'd be risking too much. Granted, the stock has been strong the last month or so, but considering today's earnings report, I'd need to see it get well over $10 per share before I'd take another look.
Disclosure: I don't own any company mentioned; positions can change at any time.
LeapFrog Enterprises (NYSE: LF) reported a decent quarter, but I won't be buying the stock. I just think there are better ideas out there in this sector. First, let's play around with the numbers.
For Q2, LeapFrog saw its top line increase by 22% to a little over $68 million. The net loss was 32 cents per share versus a net loss of 44 cents a year earlier. According to Earnings.com, analysts were expecting the loss to be about 44 cents per share. There was, however, a little help from a tax benefit in the quarter; last year, the company recorded a tax expense. LeapFrog not only scored on the bottom line, but it also expanded its gross margin. So, the quarter seemed all right. But, I then look at the cash flow statement and see that LeapFrog has been using cash for operations the last six months. In the similar time period a year ago, LeapFrog reported positive operational cash flow.
LeapFrog's stock was up over 5% in after-hours trading on Monday after the earnings release. The stock has been strong in a bad market according to the AOL Finance snapshot, and the pop in the after-hours session placed it close to a 52-week high. Again, though, I think there are better ideas out there. Hasbro (NYSE: HAS) is a toy company I'd much rather align my portfolio with. I could even look at Mattel (NYSE: MAT) and JAKKS Pacific (NASDAQ: JAKK).
I know that the stock may be signaling better times ahead, and toy companies certainly make their profits in the latter part of the year, but I still am cautious on this business. When I wrote about the company's fiscal year, I also noted bad cash-flow characteristics, as well losses on the bottom line. So, in the end, I just don't want my portfolio to play around with this low-priced equity.
Disclosure: I don't own any company mentioned; positions can change at any time.
Dark Knight, the Batman movie starring Heath Ledger, did boffo box office: $158.3 million, according to Defamer. But this blockbuster will not just benefit Warner Brothers and DC Comics, which share parent Time Warner Inc. (NYSE: TWX) with BloggingStocks. There are at least six companies that will benefit from Dark Knight's success. According to Seeking Alpha, these companies include:
Time Warner -- through its Warner Brothers and DC Comics subsidiaries are profiting most directly.
Comcast Corporation (NYSE: CMCSA) partnered with Warner Bros. to offer "behind-the-scenes footage, trailers, and mini movies on demand"
Verizon Communications, Inc. (NYSE: VZ) and Nokia Corporation (NYSE: NOK) collaborated in creating the Nokia6205 The Dark Knight Edition. Seeking Alpha reports that "This batphone targets superfans, with bat wallpaper, voice tones, screensavers, and the film's trailer pre-loaded."
Hasbro (NYSE: HAS), big rival of Mattel (NYSE: MAT) and JAKKS Pacific (NASDAQ: JAKK), reported Q2 earnings on Monday, and as Melly Alazraki stated in her Before the Bell article, the toy company had some fun business results. Revenues rose over 13% to $784.3 million, and net income increased over eight times to $0.25 per share. This number beat analyst expectations by three pennies.
Yet, the stock is down today, as of this writing, by over 2%. What the heck? Well, one thing that should be noted on the earnings growth is that it really isn't as huge as it appears on the surface. Last year at this time, the company took back some warrants issued to George Lucas' media empire that caused the GAAP earnings to come in at quite a low number. If you take the effect of them out of the equation, then, unfortunately, earnings only grew this quarter by a measly penny.
Of course, it's also a tepid market day, so that could also be working against the stock. However, inflation is an issue as well. According to this article from Reuters, the specter of rising input costs is being felt. But does this mean I should no longer be bullish on the company? While I feel that inflation is something to watch with Hasbro, I remain bullish on the shares, although I would wait for a pullback so a higher yield can be received for one's investment dollars. It's difficult, I suppose, to be bullish on a toy company when I am personally bearish on both the economy and the equities markets, but I do like the recent strength of Hasbro's stock and I like the prospects for its brands (e.g., Star Wars, Transformers) ahead of the holiday season. Hasbro's portfolio is keeping me going...hopefully it will keep the stock going, too.
Disclosure: I don't own any company mentioned; positions can change at any time.
After hitting a one-year high of $26.12 last July, the stock hit a one-year low of $16.42 in January. MAT opened this morning at $20.42. So far today the stock has hit a low of $19.96 and a high of $21.18. As of 1:05, MAT is trading at $20.48, up $2.20 (12.0%). The chart for MAT looks bearish and steady, while S&P gives the stock a neutral 3 Stars (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $15 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 13.6% return in just six months as long as MAT is above $15 at January expiration. Mattel would have to fall by more than 26% before we would start to lose money. Learn more about this type of trade here.
MAT hasn't been below $16.40 at all in the past year and has shown support around $17 recently. This trade could be risky if the damages turn out to be negligible, but even if that happens, this position could be protected by the support the stock might find around $16.50, where it has bottomed out twice in the past seven months.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in MAT.
At first glance, the numbers don't look too hot for Mattel. The company announced that profit was off by a pretty hefty 48% in the quarter, down to 3 cents per share on $11.8 million. This is down from $22.8 million, or 6 cents per share, for the same period last year. The company blamed most of the decline in weak demand for its Barbie dolls, and higher costs that it had to endure in the quarter.
From the above paragraph, you may be expecting to see the company being punished in the premarket, but in fact, shares of the stock are trading up a blazing 13.5% as I write this, and were up over 18% as of about 5 minutes ago. Why? Simple, in Wall Street it is all about expectations, and the company was able to outperform analysts estimates for the quarter, which were looking to see only a 2 cent per share report.
As the second quarter earnings crunch begins in earnest this week, the bear market has investors jittery and prognosticators spinning out dire warnings. In the wake of mixed results from Alcoa (NYSE: AA) and General Electric (NYSE: GE) kicking things off last week, here's a look at what Wall Street is expecting from many of the companies scheduled to report this coming week.
Analysts surveyed by Thomson Financial are expecting the following companies to report a rise in earnings when compared to the same period of the previous year.
Nucor Corp. (NYSE: NUE): $1.80 EPS (36.6%) on sales of $6.4 billion (+53.0%)
Google Inc. (NASDAQ: GOOG): $4.74 EPS (24.9%) on sales of $3.9 billion (+41.6%)
Nokia Corp. (NYSE: NOK): 56 cents EPS (23.2%) on sales of $19.9 billion (+17.8%)
CSX Corp. (NYSE: CSX): 90 cents EPS (21.1%) on sales of $2.9 billion (+12.8%)
Altera Corp. (NASDAQ: ALTR): 27 cents EPS (18.5%) on sales of $346.7 million (+8.4%)
IBM (NYSE: IBM): $1.82 EPS (+17.6%) on sales of $25.9 billion (+9.0%)
eBay Inc. (NASDAQ: EBAY): 41 cents EPS (17.1%) on sales of $2.2 billion (+18.0%)
Mattel (NYSE: MAT), a toy company that competes with Hasbro (NYSE: HAS) and JAKKS Pacific (NASDAQ: JAKK), got some good news earlier this week. Its stock was upgraded by analyst Gerrick Johnson of BMO Capital Markets, according to the AP, although it wasn't necessarily an overwhelming vote of confidence. The analyst is switching the rating from "underperform" to "market perform," and if you check out the AP piece, you'll see that he basically is saying that while he doesn't see a big reason to sell the stock, he doesn't see a big reason to buy it either. This was a call based on simple valuation.
I was glad when I read this clarification because, when I first spied this headline, I was a bit flummoxed. I honestly didn't expect Mattel to receive some huge upgrade at this point, even though I agree that the stock is certainly cheap. My main reason for this hinges on the best-of-breed character of Mattel's colleague Hasbro. I just wrote about this company and the strength of its stock at the beginning of the week, and if I were to buy any toy business right now, it probably would be the maker of Monopoly and Mr. Potato Head. Hasbro's got the brand strength as well as the stock strength, it seems, and even though Mattel packs a dividend-yield punch at over 4%, this market might be too tough to go with companies that are nowhere near a bullish trend.
Long-term, the maker of Barbie will rebound. Short-term, it may languish. So you'll have to consider your timeframe when taking a look at Mattel and Hasbro. Mattel does have a nice yield, but Hasbro and its product portfolio could be better positioned come the holiday season. It's going to be an interesting battle between these two rivals once the weather turns cold...
Disclosure: I don't own any company mentioned here; positions can change at any time.
CNNMoney over the weekend reviewed the first half of the year for the markets. Among its lists of winners and losers, one stock got my attention.
Believe it or not, Hasbro (NYSE: HAS), a competitor of Mattel (NYSE: MAT) and JAKKS Pacific (NASDAQ: JAKK), was up quite nicely through the end of June. How nice? The stock increased in value by almost 40%. That's impressive, but is it persuasive? What I mean is, should one believe that the company's first-half strength is an undeniable indication that the trend will continue for the rest of the year?
I have been bullish on Hasbro and I think it's a great company that should benefit from the upcoming holiday season, but should doesn't necessarily imply would. We are in what I would call an all-bets-are-off market. The bears, and their claws, are slashing their way through the hallowed halls of Wall Street, and if the negative-wealth effect really gets going, thus further damaging consumer confidence, then one would have to wonder how Hasbro will fare in the second half of the year.
Without a doubt, though, put Hasbro on your watch list and perform some due diligence on the company. It's got some great brands in its portfolio like Monopoly and Transformers, and keep in mind that its Star Wars line is due to receive a nice catalytic jolt from the upcoming Star Wars: The Clone Wars animated project. Hasbro's stock dropped almost 7% in the last month. This followed a lot of up months. If the stock experiences a further pullback, and the dividend yield rises, it may become attractive.
Disclosure: I don't own any company mentioned; positions can change at any time.
Remember that movie deal that Hasbro (NYSE: HAS) signed not long ago with General Electric's (NYSE: GE) Universal Pictures for the express purpose of bringing some of its board game brands to the big screen? Well, I'm happy to report that the first one appears to be in development. And it's the one I was rooting for!
According to the Hollywood Reporter, the Ouija board is getting the big-screen treatment. Sure, Ouija boards have been featured in films before; heck, my friends and I used a Ouija board in a short film we made years ago. But, this time, Hasbro is hooking up with Michael Bay and his Platinum Dunes production company to give the concept a proper cinematic adaptation, one specifically geared, I have no doubt, to increase the value of Hasbro's brand equity and to, like this needs to be even stated, sell more Ouija boards!
Michael Bay is a pretty competent producer/director. He was responsible for Transformers, as I'm sure you'll recall, and he's been hard at work the last few years on remakes of famous horror films. He's already been involved with remakes of The Amityville Horror and The Texas Chainsaw Massacre, and he is working on new takes of A Nightmare on Elm Street and Friday the Thirteenth. He'd better get the latter right, since it's one of my favorite films!
Toymaker JAKKS Pacific (NASDAQ: JAKK) lost the expectations game earlier this week, my friend. Wall Street was looking for more in terms of earnings per share than the company was apparently able to deliver. Was JAKKS playing around too much these last three months? Who knows -- this business can certainly be fickle, after all.
For the first quarter, JAKKS saw its revenues increase over 5% to nearly $131 million. Earnings per diluted share came in at $0.03 if you take into account litigation expenses, restructuring charges, etc. On an adjusted basis, JAKKS earned $0.13 per share, compared to a year-ago adjusted earnings of $0.14 per share. According to Briefing.com, this was $0.06 less than what the Street wanted.
JAKKS, which competes with Hasbro (NYSE: HAS) and Mattel (NYSE: MAT), didn't have a great quarter, it's true. But I've always found this company and stock to be an interesting one, as it seems to do well over time with its various licensed products, such as merchandise based on some Disney (NYSE: DIS) brands, including Hannah Montana, and toys based on Viacom's (NYSE: VIA) Nickelodeon channel.
Whenever the stock is on a pullback, it always catches my attention (although, I should point out, I have never owned it). In addition, the balance sheet appears to be in good shape: there's a nice amount of cash and cash equivalents at $238 million, long-term debt has remained stable, and the accounts receivable line is down.
JAKKS is still forecasting $2.91 per diluted share for the current fiscal year. Given the share price as of this writing, the P/E ratio on the stock remains compelling.
Disclosure: I own shares of Disney; positions can change at any time.
Parents rejoice: Bratz dolls are going the way of the hula hoop!
Hasbro
Shares of toy maker 
As the second quarter earnings crunch begins in earnest this week, the bear market has investors jittery and prognosticators spinning out dire warnings. In the wake of mixed results from 
Here are some highlights from this past week's 
Toymaker 
The Wal-Mart Weekly: Retailer accused of sweatshop conditions in Bangladesh
Fog clearing - maybe. Clear skies - no! GE, JNJ, MRK, PG, RTN, WFC
Cramer on BloggingStocks: A fighting chance for the credit markets.
