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Tuesday, Dec 5, 2023

Toymakers Feeling Playful

With another holiday shopping season upon us, toy companies in Los Angeles County are expecting big things this year.

That includes Ynon Kreiz, chief executive of El Segundo-based toy maker Mattel Inc.

“We are very well positioned competitively and expect a strong holiday season,” Kreiz said during a conference call with analysts to discuss third quarter financial results on Oct. 25. “Going into the fourth quarter, we have a broad-based lineup of innovative toys across multiple categories, play patterns, and price points.”

But Kreiz did concede that the industry as a whole was shrinking.

“We now expect the industry to decline mid-single digits for the full year,” he said in the call.

But to reiterate, the company expects its point of sales to increase for the year, he said.

“It was up in the third quarter. It was up year-to-date. We expect it to be up in the holiday season, up in the fourth quarter and up for the full year,” Kreiz added. “So we are very well positioned competitively and to see us continuing to perform well … so all in all, expect (Mattel) to continue to outpace the industry and gain market share in the fourth quarter and the full year.”

Mattel CEO Ynon Kreiz.

Whitney Hatfield, a spokesperson for Santa Monica-based toy company Jakks Pacific said that the company is looking forward to a great holiday season.

“We have a lot of exciting new product introductions including a wide range of dolls and playsets for Disney’s ‘Wish,’” she said. “All year we’ve seen a great reaction to our Super Mario Brothers Movie line as well as our Nintendo evergreen products. Our Target Shopping Cart and Target Cash Register are both sure to be a hit this holiday as well.”

“Wish” from The Walt Disney Co. in Burbank hits theaters on Nov. 22.

The lone exception to the positive outlook for the holiday shopping season was Isaac Larian, founder and chief executive of MGA Entertainment Inc., the Chatsworth toy manufacturer.

He expects the toy industry to be down by 9% to 12% this holiday season.

“Demand is lower, interest rates are higher and inventory from last year is still in the market,” Larian said. “It is going to be a bad year for business.”

That is the exact opposite from the Wells Fargo Economist Team forecasting holiday sales to increase 5% this year.

“With all due respect to Wells Fargo and other people who claim that business will be up, they are wrong,” Larian said.

Increase expected

Tim Quinlan, a senior economist at Wells Fargo behind its holiday sales report, said a 5% increase in sales was above the long-term average but the smallest annual increase seen in the last four years.

“December is still the most important month of the year, but on trend its growth gets smaller each year as spending keeps getting pulled forward,” the team said.

Hatfield would not say if Jakks Pacific’s estimates on the holiday season were in line with Wells Fargo’s as the company doesn’t focus on whether the market is growing or shrinking in any one year. 

Instead, Jakks focuses on classic toy categories, often with brands and characters that are either peaking in popularity or span generations in their appeal, she said. 

“There are new three-year-olds entering the world every day – that’s who we’re focused on,” Hatfield added.

The Wells Fargo team did highlight one past trend that will continue – online shopping.

“E-commerce has been king of holiday sales in each of the past four holiday shopping seasons,” the team said. “We look for this trend to continue in 2023 as online retailers fine tune last-mile delivery capabilities.”

A write up on Jakks Pacific from Oct. 27 at the finance and investment website Zacks.com said the company realized the importance of online retailing and shifted focus to aggressively boost online sales.

“Jakks Pacific has been committed to creating digital experiences for online shoppers, such as videos, 360-degree product images and enhanced web pages,” the website said. “It continues to modify its sales and logistics capabilities in order to capitalize on this continued shift to online.”

But Hatfield said that although online shopping is convenient, the company still thinks there’s a lot to be said for the in-store toy aisle shopping experience.

“(It’s about) seeing the full range of products, reading the packaging and get a hands-on feel for what the toy is all about,” Hatfield said. “Plus, you get to see what other people are buying, too.”

Different price points

MGA’s Larian isn’t all doom and gloom when it comes to the holiday shopping season.

He said that products in the $10 to $15 range will do well.

MGA Entertainment CEO Isaac Larian.

There are over 500 toys made and sold by MGA in that price range, including MGA’s Miniverse collectibles and Fluffie Stuffiez, a plush doll from which one can pluck the fur to reveal another creature. 

On the other end of the price scale is the Little Tikes Story Dream Machine, a projector that allows children to watch, listen, and read along to their favorite stories. It comes with three story cartridges and retails for $49.99.

Mattel’s Kreiz said that in the third quarter the dolls segment of the business did well based on the response to the movie “Barbie” and the line of products for both kids and adults, the expanded Disney Princess and Disney Frozen line, and the global rollout of Monster High. 

“Vehicles performed exceptionally well, driven by Hot Wheels,” Kreiz said. “The franchise is on track for a sixth consecutive record year of growth as we continue to innovate in new segments, including the new Racerverse line.”

In terms of Mattel’s entertainment business, the third quarter was the breakout for the company.

The “Barbie” movie became the biggest hit of the summer as it went on to become the highest-grossing film of the year. It’s $1.4 billion in box office receipts made it the highest-grossing film released by Warner Bros. in Burbank.

Its direct movie participation, movie-related toy sales and consumer products was expected to deliver more than $125 million in sales for the full year, Kreiz said during the conference call. 

“And the majority of all that was recognized in Q3 and probably with a skew more towards the movie relative to the other items,” he added.

The movie was a showcase for the cultural relevance of Mattel’s intellectual property, its ability to attract and collaborate with top creative talent and its creative capabilities at a global scale, he continued.

“The movie has broadened Barbie’s fan base which will be an important contributor for the brand as part of our long-term franchise management strategy,” Kreiz said.

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