Hasbro, Mattel shares rise as toymakers announce multiyear licensing agreement, increased IP focus

Toy stocks rally after Hasbro and Mattel earnings reports.

Hasbro, Mattel shares rise as toymakers announce multiyear licensing agreement, increased IP focus

Hasbro is a game maker.

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Stocks of toymakers rose Thursday after Hasbro and Mattel announced their quarterly results and made optimistic remarks about their intellectual property.

Hasbro's shares soared by more than 13 percent on Thursday, after the toymaker announced first-quarter revenues that exceeded Wall Street expectations. Monopoly, the board game manufacturer, posted net revenues of $1 billion. This was higher than the $878.4 millions expected by Refinitiv's average analyst estimates. Revenue fell 14% from the $1.16 billion in the previous period.

Toymaker reported a net loss in the first quarter of $22.1m, or 16c per share. This compares to net profits of $61.2m, or 44c per share last year.

Hasbro CEO Chris Cocks stated that the first quarter results were better than expected and that Hasbro is now on track to reach its full-year financial goals.

On Thursday, other toy stocks including Hasbro's competitor Mattel, and the pop culture consumer company Funko also rose. Funko will report its first-quarter results next week. Toymakers said this week that they would increase their focus to leverage the popularity of key brand names to expand their reach.

Mattel, the Barbie manufacturer, announced its first-quarter earnings after Wednesday's markets closed. The results were better than expected in terms of revenue but less so on the bottom line. Mattel continues to struggle with rising costs and declining toy demand.

The toy market has seen a general slowdown from its heydays during the pandemic, when parents bought toys in droves to entertain their newly-homebound children. Inflation increased costs for Mattel and other toymakers, while consumers deferred their spending.

Hasbro and Mattel, in the face of a challenging market for toys and games, are looking to a future that is increasingly focused on Intellectual Property.

The rival companies signed a multi-year licensing agreement on Monday. This will lead to the release of toys and games with co-branded brands using the popular brands of each company.

Hasbro will begin producing Barbie-branded Monopoly in the fall of 2023. Mattel, on the other hand, will release Transformer-branded UNO and Hot Wheels games, for releases in 2023 and 2024, respectively.

In the past, both toymakers competed for licensing rights. Mattel beat Hasbro to win the license in 2022 for toys based on Disney princesses. Mattel lost the Hasbro license in 2016 and Mattel won it back.

Both companies, despite their collaborations, are working to increase the visibility of their respective IPs as they prepare for the major summer movie releases. Hasbro's "Transformers: Rise of the Beasts", from Paramount, is scheduled to be released on June 9, while Warner Bros.'s highly anticipated "Barbie" film from Mattel is set for a release on July 21.

Hasbro's board approved a sale of a portion of its entertainment assets last fall. Cocks said on CNBC Thursday that the company was "pleased" with the progress so far and will provide an update during its second quarter.

Cocks stated in a press release accompanied by Thursday's earnings report that "the global Hasbro team continues executing our strategy to unlock value from our rich IP library in our growth priorities, including gaming, direct to consumer and licensing."

Hasbro's Entertainment Segment revenue fell 19 percent from last year to $185.4 millions in the first quarter.

Analysts are watching to see if Mattel gets a boost from the Barbie film, which stars Hollywood heavyweights Margot Robertbie and Ryan Gosling.

Films are also being produced for the company's other brands including Polly Pocket, Barney and Barney.

Mattel CEO Ynon kreiz stated in a CNBC interview in 2022 that "as we continue to expand the toy business, we are also putting together a strategic plan and continuing to see the growth of our IP and capturing the value of our incredible franchises beyond the toy aisle."

Mattel executives noted in previous investor calls that animated films are more likely to boost toy sales than live action films like Barbie. This means the success of the film may not translate into doll revenue.

In the first quarter of 2009, doll gross billings (which are amounts that were invoiced to clients) totaled $306 million. The decline in sales was partly due to the drop in Barbie sales. Barbie's worldwide gross billings fell by 41% during the first quarter.

Gross doll sales in the first quarter of 2013 were $396 millions, primarily due to growth in Barbie and Polly Pocket.

Mattel is yet to reveal the full plan it has for capitalizing on the Barbie movie's buzz. Mattel executives had previously said that the company would announce a Barbie-themed toy line, which will appeal to both kids and collectors.