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Season Looks Bright for These Toymakers

We think Hasbro will gain market share but view Mattel as the more undervalued stock today.

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Jaime Katz: While the Toys 'R' Us bankruptcy weighed on third-quarter performance at toy distributors Mattel and Hasbro this year, we don't think toy sales will be left in the cold this holiday season. In fact, given the current economic state of the consumer, with low unemployment, high consumer confidence, and rising home and equity prices, we surmise the willingness of consumers to spend on such discretionary categories should prove strong in 2017. 

The National Retail Federation has indicated that total Black Friday sales have risen the most since 2011, to the tune of an estimated 4%, and it appears Cyber Monday has captured another double-digit gain, providing some promise for toy company sales. The final quarter of the year remains a key selling season for the toy distributors, with Mattel and Hasbro historically booking about a third of its revenue in the final quarter of the year, and about two thirds in the second half of their fiscal years.

Jaime M. Katz does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.