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.
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.
Yes, as a kid, I had a slinky. So did many of my friends. What's more, I remember the catchy commercials.
Well, amazingly enough, the slinky is still going strong. In fact, on CNBC's "Business Nation," there is a look at the intriguing history of this popular toy.
Richard James, an engineer from Pennsylvania, invented the Slinky in 1945. For the most part, the device hasn't changed much (and is still American-made). Like many great innovations, the Slinky was an accident. Richard wanted to develop a device for shipboard instruments. But, in the development process, he accidentally dropped some springs -- which had a rhythm.
Hmmm... could it be a toy? Richard's wife, Betty, thought so and even came up with the Slinky name. Richard actually spent two years refining the Slinky. And, when it launched, it was an instant hit.
How many Slinkys have been sold? More than 300 million.
Wal-Mart (NYSE: WMT) does not want to be known as a place where there are products that could hurt little kids. It is bad for public relations and thus bad for business. So the world's largest retailer is going to set standards for toys that are much tougher that those of the U.S. government.
According toThe Wall Street Journal, Wal-Mart does not just want the toys to be manufactured more safely. The paper writes, "The initiative also encourages suppliers to mark children's products with 'traceability information', including the factory in which the goods were made. About 80% of the toys sold in the U.S., including those marketed by U.S.-based toy makers, are manufactured in China."
Wal-Mart is a little late to the party. The threat of lead and other toxins has been causing trouble for retailers for over a year. Several of the company's competitors already have similar programs in place. And Wal-Mart sources a lot of inventory in China, so it may not want to be seen as leading the pack in a public relations war with the People's Republic.
The news also begs the question of why Wal-Mart was not inspecting the toys on its own. Of course, that would be expensive.
Shares of popular toymaker Hasbro Inc. (NYSE: HAS) have been climbing in early trading after the company posted this morning a better-than-expected fourth-quarter profit.
For the quarter, the world's second-largest toymaker reported that its profit jumped 24% up to $133.7 million, lifted by strong sales of its Transformers, Nerf and Furreal Friends product lines. Strong revenue gains offset weaker gross margins and lower U.S. earnings, and the company posted earnings of 84 cents per share. Analysts were expecting Hasbro show earnings of 81 cents per share in the quarter.
Amid a challenging consumer environment, Hasbro announced a respectable jump of 16% in revenue to $1.3 billion, up from $1.1 billion a year earlier. Revenue during the period were helped by a 29% surge in its international sales that outpaced those in North America. Analysts, on average, forecast sales of about $1.22 billion, according to Reuters Estimates.
My eldest child spent a lot of her young childhood with a LeapPad on her lap. Introduced in 1999, the LeapPad was an overnight hit that catapulted the maker of the reading device, LeapFrog (NYSE: LF), into stardom with a rocket of a stock to boot.
According to the company, LeapFrog went on to sell 30 million LeapPads and related products worldwide, as well as more than 70 million companion books. In 2003, the LeapPad family of products brought in $330 million, nearly half of LeapFrog's revenue. Since then, the company has suffered at the hands of lower-priced competitors, lack of another blockbuster hit (although the firm has has launched critically-acclaimed products), and video games.
So, today's New York Times article, "LeapFrog Hopes for Next Hit with Interactive Reading Toy", may be what the company needs to help an ailing stock. The Tag certainly looks cool. It is a thick, white-and-green plastic stylus that turns paper books into interactive playthings. Like the LeapPad, kids can tap a word with it and the stylus reads the word, or its definition, aloud. They can tap on an image to hear a character's voice come alive.
The Associated Press reports that tests on 1,200 children's products -- most of which are available for sale -- revealed that 35% contain more lead than allowed by federal recall standards used for lead paint. Lead poisoning can cause irreversible learning disabilities and behavioral problems and, at very high levels, seizures, coma, and even death
Of the toys tested from the shelves of Wal-Mart Stores Inc. (NYSE: WMT), Toys "R" Us and Babies "R" Us, here are three that had particularly high lead levels:
This post is part of our Hottest Products of 2007 feature. Also check out our other Hottest Products of 2007 posts and let us know which product you think is the greatest thing since sliced bread.
Webkinz are the most annoying trend since Beanie Babies, which were the most annoying trend since Cabbage Patch Kids. They also are among the most cleverly marketed products ever.
Ganz, the closely held Canadian company behind Webkinz, seems to have figured out how to entertain today's media-saturated kids.
"More and more, kids are going to the internet," Ganz says on its website. "Why? It's interactive. Instead of passively watching television, the internet gives kids choice. They can play games, chat with friends and express themselves. They decide how to have fun."
With all the recalls this year of toys made in China -- due to lead paint and other hazards -- TheDailyGreen was kind enough to publish a list from Toys "R" Us marked "not made in China."
The list includes the item numbers on the Toys "R" Us web site. And unfortunately, there are no guarantees that all the products are really not made in China. Even if the toys are made in countries other than China, that does not necessarily mean that the toys are safe.
To be sure, you'll need to check the safety of the toys yourself by calling the manufacturer. It would be nice if the government could help make toy shopping safe for Americans. But it won't so you'll have to take responsibility for protecting your children from toy manufacturers.
Unfortunately for parents out there preparing for the upcoming holiday season, this past year's toy recalls have to be a constant reason for concern, and today we get news of another recall. By now we are pretty adjusted to reading news of recalls due to high levels of lead paint, but today's recall involves something a little more alarming ... a date rape drug!
Yes, you read that right, it has been announced that millions of toy products in North America and Australia have been taken off the shelves after it was discovered that they contained chemicals that, when digested, convert into the date rape drug gamma hydroxy butyrate (street name of GHB). The toys in question are toy beads that go by the name Aqua Dots, and are considered a highly popular holiday item, which is distributed by Toronto-based Spin Master Toys. For Australian consumers, the toy sells under the name of Bindeez.
Just how popular is this toy line? This year in Australia it was named toy of the year. Just how dangerous is the ingestion of the drug? If swallowed, one of these beads can induce unconsciousness, seizures, drowsiness, coma and death.
According to The Associated Press, traditional made-in-America toys are making a comeback. "As consumers look for alternatives to Chinese-made toys following a series of recalls this year, dozens of small toy companies are struggling to meet surging demand. Some owners report online sales up as much as fivefold from last year. They're hiring extra workers, expanding warehouses and adding extra assembly shifts."
Perhaps with Wal-Mart (NYSE: WMT) on the skids and Chinese-made toys under the microscope, we are looking at a return to the "Made in America" ideals that Sam Walton espoused, as evidenced by the title of his autobiography, which seems ironic given Wal-Mart's reputation today.
But I would argue that the shift toward American-made toys is good for more than just economic reasons. Shifting away from cheap imported electronic toys toward traditional wooden toys is good for kids' development -- playing with blocks builds a lot more creativity than Gameboy does.
If you're looking to profit from the recall madness as an investor, your options are pretty limited. 1-800-Flowers.com (NASDAQ: FLWS) owns HearthSong and Magic Cabin, but those are a relatively small portion of the company's business. But if you believe in the 1-800 Flowers business' growth story, the stock may be worth a look.
Today's recall involves around 90,000 items, 70,400 of which were imported by J.C. Penney Company (NYSE: JCP) and feature the beloved Walt Disney (NYSE: DIS) character Winnie the Pooh. The culprit is, once again, excessive levels of lead paints. The actual products J.C. Penney was forced to recall were Winnie the Pooh playsets and decorative ornaments with a horse-theme, as well as art kits made in Taiwan and Vietnam.
The good news is that many retailers like J.C. Penney are doing their best to try to keep these toxic toys from landing in the hands of children. Earlier this summer, the company decided to hire an independent laboratory to run tests on all of its painted toys. These independent evaluations, which started in August, are credited with catching today's recalled toys.
This holiday season parents will need to choose between buying American and getting the toys their kids want. According to USA Today, That's because 80% of all toys sold in the USA are made in China. Some internal toy-industry estimates show only about 10% are actually made here.
Not only are few toys made in the U.S. but the ones that are don't appeal to the typical American child. That's because 10% of toys that are U.S.-made are wooden, old-fashioned "nostalgia" toys, such as blocks or puzzles, that may not hold the interest of kids older than toddlers. As noted in my post last month, there's Slinky, the twisty-wire-walking toy from the 1950s, and some plastic toys like K'Nex construction sets.
And here's the bad news about U.S. toys -- while they're safer than those made in China, they have some problems of their own. For example, U.S.-made toys were the subject of four of the 40 toy recalls the Consumer Products Safety Commission (CPSC) announced in the 2006 fiscal year, or 10%. Chinese-made toys were the subject of 28, or 70%. The other recalls were divided among toys made elsewhere in Asia and Europe.
If you have advice for parents seeking safe American toys that their children will actually want to own, please comment below.
Wal-Mart Stores, Inc. (NYSE: WMT) has started the holiday party early by dropping prices on an assortment of products in the toy aisles. Wal-Mart has been trying to get past its low-cost image, but this won't help. It wants to be known for more than being a discount retailer, but here we are again with the retailer leading the charge to a low-price showdown with the competition. The holiday season is approaching, of course, so perhaps that is a little too harsh. Dropping prices is the name of the game when it comes to the annual holiday shopping season, no matter who you are, right?
Although massive toy recalls have been (and continue to be) in the news, perhaps Wal-Mart wants the public to forget about all that and come on in for some three-months-in-advance savings on those holiday toys. In addition to the toy price cuts which took effect yesterday, the retailer is said to be cutting prices on more toys every week in October, so madness will reign in toy aisles this month. Be prepared to shove some elbows for those Barbies, okay?
It seems that the uncertain economic environment is already filtering down to retailers. Wal-Mart is already in a precarious position for the current quarter after seeing profits and same-store sales tumble since late 2006. Target Corp.'s (NYSE: TGT) announcement that September sales will fall just adds fuel to the fire. Add that to the report from the National Retail Federation that claims that U.S. holiday sales will rise at their slowest pace in five years, and there you have it -- Wal-Mart starts going nuts with the pricing guns in the toy aisles. Check back in January and we'll see if it worked.
"All I want for Christmas is my two front teeth" ...and toys made in America.
An article in today's Wall Street Journal (subscription still required) describes how domestic toy makers now have a possible leg up on the competition as consumers head into the holiday buying season. The few remaining domestic toy manufacturers are reportedly launching marketing campaigns aimed at showing consumers their all-American, all-safe wares.
Seems "Made in America" is once again a selling point, especially to parents looking to avoid toxic levels of lead paint that have prompted four major toy recalls in recent months. All of the toys recalled have come from China, manufactured for major toy companies such as Mattel Inc. (NYSE: MAT).
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.
Shares of toy maker 
Yes, as a kid, I had a slinky. So did many of my friends. What's more, I remember the catchy commercials.
and 
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Wal-Mart
My eldest child spent a lot of her young childhood with a LeapPad on her lap. Introduced in 1999, the LeapPad was an overnight hit that catapulted the maker of the reading device, 
Webkinz are the most annoying trend since Beanie Babies, which were the most annoying trend since Cabbage Patch Kids. They also are among the most cleverly marketed products ever.
With all the recalls this year of toys made in China -- due to lead paint and other hazards -- 
Unfortunately for parents out there preparing for the upcoming holiday season, this past year's toy recalls have to be a constant reason for concern, and today we get 
According to The Associated Press, traditional 
We have 
"All I want for Christmas is my two front teeth" ...and toys made in America.
Analyst sees oil dropping to $50 on global economic slowdown
Lehman screws workers out of severance payments
No Cramer, now is not the time to panic!
