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Full Year 2023 Results In From Hasbro, Mattel & Spin: What We Learnt About The Toy & Games Market Heading Into 2024

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THE BIG 3 REPORT FULL YEAR 2023 RESULTS: WHAT DID WE LEARN?

FY 2023 results have now been reported by Hasbro, Mattel & Spin Master (although the latter only reported preliminary results with some financial work still to be done on the details). For those trying to follow what is happening across the world of Toys & Games, these results are normally revealing because a). They offer up hard data as to the performance of the market leaders b). It becomes clearer which categories and types of products are winning in the market and c). The senior management of these companies get grilled on their earnings calls by investment analysts who often (but not always!) ask awkward questions to get to the reality & truth behind the headline data.


Overall, this round of results confirmed what we already knew – the market for Toys & Games has been under pressure post the initial pandemic sales boom. But we need to go into further detail to truly understand what these results reveal to us about market dynamics and the outlook for these companies and the broader market.


 

HASBRO – A SELF-DRIVEN REVENUE DECREASE?

Hasbro have been going through one of those difficult periods which seem to come cyclically in this business. At the time of writing, their share price is just under $51 USD, which looks rough versus the c. $100 price a couple of years back and even further away from the peak of $124 in 2019. Just to put this in context though, I remember the share price being close to single figures back in the early noughties when I worked for Hasbro myself, so the current difficult stretch needs to be put in the context of Hasbro’s massive success across the last decade, and their massively strong stable of iconic brands which are still all in place.


Hasbro reported full year 2023 revenues down a substantial 15% year on year, which bearing in mind 2022 was also down 9% on 2021 might give the impression of a really desperate situation. Hasbro also confirmed they lost more than $1.5 billion in 2023, which again looks terrible if taken at face value. However, there is a more nuanced story behind the financial headlines with Hasbro. The company is in the unfortunately painful process of refocusing on the core ‘Play’ business having spent the previous period with strong push on the entertainment/content industries. Most of Hasbro’s loss in 2023 is attributable to the sale of eOne’s now non-core Entertainment capabilities.


The significant reduction in revenues can be explained by strategy as much as just being due to a tough market though. Typically when a stock market listed company hits a turn in the road whereby a previous strategy has largely played out, and there is less prospect of significant sales growth, there are two options: 1. Try to acquire in adjacent sectors in order to continue growing revenues or b). Go back to basics, cut hard and deep and go through the trauma of ‘resizing’ the company to a lower level of revenues, but to higher levels of bottom-line profitability.


Hasbro’s latest strategy of ‘Fewer, Bigger, Better’ then is in effect a self-fulfilling prophecy of lower revenues, but eventually higher profitability & net cash generation. By aggressively out licensing a significant number of Tier 2 brands and focusing resources and investment on developing and launching fewer products, the company is looking to play a prudent financial game. I remember back in my time at Hasbro the Finance guys tended to love licensing out deals, as it generated pure bottom-line profit back with much less overhead required to drive the profit. With this strategy, eventually the sales decline will level out, leaving the company leaner and more profitable.


The difficult late announcement in 2023 of additional painful job losses on a large scale should be taken less as a sign of a downward spiral, but more as the logical next step in executing the strategy. With this type of strategy the first job losses come from core functions as the company needs fewer people to develop and launch fewer products. What comes next normally is a second phase, where the company sees less need for expensive office space and supporting functions with a smaller overall headcount to service. It could well be the case that Hasbro decided to ‘kitchen sink’ 2023 i.e. seeing it was going to be a difficult year, the company may have chosen to take as many financial hits as they could in what was already a bad year financially speaking, in order to set up a more successful 2024 & onwards from a lower cost base.


Hasbro has so many strengths – the ongoing power of the Magic: The Gathering and broader Wizards of the Coast business, the strong position in Gaming and in Nerf they have a proven power brand, which could see upside in H1 2024, as 2023’s Nerf performance surely was impacted by excessive inventory in retail leading to reduced stock intake in Nerf’s most critical period of the year.


One other point I would make though is that the idea of doing more with less often looks good to the management consultants and the bean counters, but the reality is that retail buyer relationships are still critical, even taking into account all the technological advances we have seen and the rise and rise of Amazon. The reality is this – you may be more focused on fewer brands and fewer skus, but in effect that gives you less time with your Buyers, who are now spending more time with your smaller competitors who licensed your lesser brands from you. There is always a risk with this strategy of delivering less with less instead of more with less.


So, in conclusion on Hasbro, I would say that some of the seemingly negative financial news regarding the company is in effect self-induced as the company pivots corporate strategy. Even in a tough market I would expect Hasbro to deliver massive bottom-line profit in 2024, but there is also a risk of the out-licensing of Hasbro’s brands helping smaller competitors to level up.

 


 

MATTEL – HOW TO FOLLOW THE SUCCESS OF THE BARBIE MOVIE?

“When the battle is over, tighten your chin strap” Japanese samurai saying.

One of the peculiarities of our industry is that it can be a huge success which causes us the most problems! Any company or management person who has been the beneficiary of a massive product or content output success will know that following the success can be difficult, and above all risky. Many businesses and businesspeople start to think after massive success that they are the reason for the success and that they can in effect walk on water. I remember having a massive success in a previous role, which nearly killed the company as success came easily, overheads became bloated, and eventually the impact nearly killed the company.


Why is all this relevant to Mattel? Put simply, 2023’s Barbie movie was a monstrous success, surely way beyond the expectations of even any of Mattel’s Barbie team. The movie was the number one highest grossing at the global box office in 2023 and the 14th highest grossing movie of all time. The Barbie movie is also the highest grossing ever for a franchise that began with Toys vs being a movie franchise that later spawned Toys. That is just a stunning success, and congratulations to all at Mattel for this massive achievement.


The challenge now though (of course!) is what comes next? If you tried to value the Barbie brand at this point in time, it has arguably never been such a massive part of the zeitgeist. But the operational challenge is in ‘anniversarying’ shipments and sell through.

Mattel reported global revenues as flat year on year for 2023 versus 2022. In the market circumstances, that’s a very positive result, especially when compared with Hasbro’s revenue trend. However, the challenge here is that if the year in which Mattel achieved No. 1 at the global box office with the Barbie movie delivers flat sales, what happens in 2024 when the company has to anniversary the movie year in a market which is not quite as tough as it was in 2022 and 2023, but which is nevertheless still not easy?


The positive market trend for Mattel though heading into 2024, is that ironically they are normally less reliant on a successful movie slate than their long term rivals Hasbro, depending instead to a large degree on their own core IP, especially their big 3: Barbie, Fisher Price & Hot Wheels. As I have written in previous instalments of this newsletter, when the movie slate is weak, consumers and retailers tend to fall back on evergreen iconic Toy brands, and so while the market remains tough, and Mattel in particular have a tough gig ahead to anniversary the Barbie movie year, they may see a better 2024 than some analysts have predicted due to the timeless strength of their iconic core Big 3 brands.


 

 

SPIN MASTER – TEXTBOOK EXAMPLE OF HOW TO DIVERSIFY & DERISK YOUR BUSINESS?

Spin Master have been in a golden age of expansion for around a decade or more at this stage. Whereas Hasbro & Mattel are now too big to entertain the average acquisition in the Toy & Game business any more, Spin Master have been scooping up I.P. on an ongoing basis to fill out their brand roster and diversify their business.


Spin’s preliminary results for 2023 reveal that corporate revenues reduced by 5.7% caused by an 11% decline in Toy revenues but balanced out by revenues from entertainment & digital revenue. Spin Master also have a tough year ahead in 2024 in terms of anniversaries of movies, with Paw Patrol: The Mighty Movie performing well at the global box office in 2023.


The good news for Spin Master’s revenues in 2024 should be the addition of Melissa & Doug to the companies stable of brands and products. While the headline purchase price has raised some eyebrows, M&D’s portfolio of highly profitable open ended play products appear to fit well alongside Spin Master’s existing entertainment driven offerings. In addition, this appears to be a major risk reduction exercise for Spin in terms of reducing the corporation’s reliance on fossil fuel derived plastics as the primary material for their physical products. Over time we can expect consumers to want to move away from oil-based plastics, and if they should suddenly do that in a dramatic fashion, Spin Master have now reduced that risk to their business with the acquisition of a leading player in the wooden Toys segment.


 

IN CONCLUSION

It’s a cliché I know, but as the saying goes: “When the going gets tough, the tough get going”. So the bottom line is this – it’s a difficult market right now for Toys & Games, for many of us it’s as tough as we’ve seen it. But whining and whingeing aren’t going to magic revenues up, only innovation, inspiration, smarts & hard grind will deliver results. And like with any rain clouds, they always clear and eventually the sunshine returns. Those who take the appropriate steps will come through stronger and better set for when the good times return!

 

N.B. All trademarks featured herein are the property of their respective owners.



TOY & GAME INDUSTRY PEOPLE SEEKING NEW JOB ROLES

This new section to the newsletter is going to share details of qualified Toy & Game people seeking work. The following people have approached me seeking new roles, if you are an employer looking for staff & want to be introduced to any of these people or see their CVs/Resumes, please message me:


· Experienced Head of Product Development (UK based) – has worked for several well-known Toy companies & lead development of hundreds of product ranges. I know this candidate well & can personally highly recommend him.


· Head of China/Hong Kong (China based) – an experienced Sourcing expert & China distribution executive.

Please message me for more details on these candidates.

 


CURRENT PROJECTS

Here’s some of the live projects I’m working on:

·       Finding international distribution for a major Outdoor Toy vendor in India.

·       Finding international distribution for PRISMIC – an innovative new creative play product experience with a stunning end result. We showed this new brand at New York & Spielwarenmesse Toy fairs & have had a great response. Distribution for some markets is still available though, please dm for further details: https://www.youtube.com/watch?v=Cbnwuh4C1TY

·       Recently delivered candidates for a USA General Manager role.

·       Just gone live with 3 Account Manager roles for UK, France & Germany.

·       Working with leading board games factories in India & China to find new clients.

·       India’s leading Toy factory – helping my clients to find geographic diversification in their supply chain.

 

For more information on our services, click here: 

 

 

SPIELWARENMESSE – SPIRIT OF PLAY BLOG


ADDICTED TO SPIELWARENMESSE

It’s 25 years since I first visited the Spielwarenmesse show in Nuremberg. This article is a personal reflection of the importance of this show in my life and career.

 

THE GROWING ‘KIDULT’ OPPORTUNITY

Here’s to Adults growing older later! The Kidult market is a major thing right now, offering significant growth opportunities for Toy & Games companies despite the fact that birth rates are dropping in most major markets. Read more in this latest article I wrote published by the Spirit Of Play Blog, which is published by Spielwarenmesse, the world’s biggest Toy trade show. Click the link below to read the full article:

 

Also here’s a short video excerpt from my presentation at Spielwarenmesse’s Toy Business Forum in 2023 looking at the potential impact of the ‘Kidult’ phenomenon on the future of the Toy business: https://www.youtube.com/watch?v=hE2ZERGW7nc&t=26s

 

 

UNCHANGING PLAY FUNDAMENTALS

So often in the world of Toys we look for the big changes, we go trend spotting to find new things to jump on. The reality though is that far more doesn’t change than does. That’s what this latest article I wrote, published by Spielwarenmesse.de looks at. Just click the link below to read:

 

 

PLAYING AT BUSINESS PODCAST


 

 

EP 104 – 2024 Global Toy Market Outlook, Another Year Beckons

2020 and 2021 were unexpectedly boom years for the Toy business overall as locked down families invested out of season in play activities for their homebound children. 2022 and 2023 were significantly worse years for the Toy trade. The question now is what happens in 2024? Host Steve Reece talks through the factors affecting Toy market performance in 2024 in this latest episode. 

 

EP 103 – Why Product Selection Is Critical For Toy Companies aka Why I Turned Down Settlers Of Catan

In this episode we take a look at how choosing the right products to launch is the fundamental success factor for Toy & Games companies. Host Steve Reece uses an example of when he turned down a now famous & massively successful product as an example of how sometimes turning away good products is necessary in order to focus on what will work best for your company and the business model and market positioning of your company.


EP 102 - Selling A Toy Business: How Mergers And Acquisitions Work In The Toy Biz

Many companies in the Toy business grow via acquisition. Company owners often want to sell up and retire or move onto other pastures. In this episode we take a look at some of the biggest Toy acquisitions of all time, we look at why and how Toy Cos are bought and sold and we discuss the details of the process of buying or selling.

Maybe you have a Toy business you want to buy or sell, or maybe you just want to understand how company sales work in the world of Toys, either way this episode will have something for you.

 

 

 

 

Sign up for my free e-newsletter and receive all the latest reports, analysis and insights on the Toy & Games business: sign up for free here: https://forms.aweber.com/form/54/1325077854.htm

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