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Tickers in this Article: MAT, HAS, ATVI, ERTS, MVL
Mattel (NYSE: MAT) achieved a small boost in its quarterly earnings via an ongoing cost-cutting program, spurred on by the difficulties toymakers have faced since the depth of the recession. After Mattel and other toymakers went through a dismal Christmas season last year, Mattel is attempting to get leaner in advance of this year's traditionally busy time for toy buying. Mattel also faces strong competition from other players in its industry, so the battle for consumer dollars will be fierce.

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Mattel's Report
Mattel earned 6 cents per share profit for the second quarter, or $21.5 million, up from 3 cents per share or $11.8 million in the same quarter last year. Revenue, however, fell from $1.11 billion in the same quarter last year to $898.2 million in this year's quarter. Profits were boosted by the ongoing cost-cutting program, designed to take out from $180-$200 million over a two year period.

Beyond the Earnings Report
While the goal of the cost-cutting is to keep inventories lean and ultimately avoid a repeat of the bleak Christmas season last year, Mattel is facing other challenges. Its major competitor, Hasbro (NYSE: HAS), just reported a robust earnings quarter boosted by its strong tie-ins with movie properties Transformers and G.I. Joe.

Mattel does not have any blockbuster properties this summer, and there is some concern that its age-old staple property, Barbie, may be a bit tired. Job cuts and price increases will only take Mattel and other toymakers so far, the key is the ongoing development of fresh properties and new toys.

Others in Toyland
Mattel's other competitors are feeling this consumer squeeze as well. Marvel Entertainment (NYSE: MVL), renowned for its comic-book and movie properties, is also having a quieter year as it is between blockbuster movies.

Even the thriving videogame industry, led by Activision Blizzard (Nasdaq: ATVI), with its signature properties such as Guitar Hero, World of Warcraft and other best sellers, finds itself in a climate of falling videogame industry sales. Electronic Arts (Nasdaq: ERTS), another videogame powerhouse with its well-known EA Sports line, is also in the midst of the battle for attracting what may be momentarily fewer dollars.

Is Mattel an Opportunity?
Right now Hasbro has the hotter hand in the toy biz, yet investors should keep in mind that this especially severe recession has perhaps temporarily dampened toy demand, but has not necessarily permanently damaged the toy industry. Unlike autos, as the recession begins to loosen its stranglehold on the consumer, kids will get their toys again and there should be some pent-up demand unleashed.

Mattel, along with Hasbro and the videogame stocks, should see a resurgence of demand in the next couple of years, perhaps beginning this Christmas season, making their beaten down stocks good long-term bargains. Look for Mattel to re-invigorate its product line and answer the challenge of both the economy and its competitors as Mattel resumes its long term value as an investment. (For more on the video game industry, check out Power Up Your Portfolio With Video Game Stocks.)

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