The Associated Press report that toy stocks have slumped on the back of a lack of hot products. Here are some quotest to help explain what this means.Over the past three months, shares of Mattel Inc., the nation's largest toy maker, declined 7 percent, to close at $16.61 Monday, while shares of No. 2 rival Hasbro Inc. slid 14 percent to $18.13. Meanwhile, shares of Jakks Pacific Inc. have fallen 25 percent to $19.74.
The Dow Jones index that tracks toy stocks is down 16 percent for the past three months and almost 17 percent for the year.
"The current outlook is not terribly good" for toys, said Sean McGowan, a toy analyst at Harris Nesbitt Inc. who estimates toy sales this year could be unchanged from a year ago.
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Toy Stocks Slump on Lack of Hot Product
Toy Shares Slump, but Does That Foretell a Poor Holiday Season?
NEW YORK (AP) -- It's summer, always a slow time for toy sales, but stocks of some major manufacturers and retailers have taken a beating recently because some investors believe there are no hot toys on the market right now. And that's making them question what's in store for the holiday period.
Over the past three months, shares of Mattel Inc., the nation's largest toy maker, declined 7 percent, to close at $16.61 Monday, while shares of No. 2 rival Hasbro Inc. slid 14 percent to $18.13. Meanwhile, shares of Jakks Pacific Inc. have fallen 25 percent to $19.74.
The Dow Jones index that tracks toy stocks is down 16 percent for the past three months and almost 17 percent for the year.
"The current outlook is not terribly good" for toys, said Sean McGowan, a toy analyst at Harris Nesbitt Inc. who estimates toy sales this year could be unchanged from a year ago.
The industry has struggled in recent years in part because children are growing out of toys at a younger age and preferring video games and other gadgets. Sales of traditional toys fell 4 percent to $21.3 billion in 2005, from $22.1 billion in 2004, according to NPD Group, Inc., a market research firm in Port Washington, N.Y.
What's helping to sour Wall Street's mood on toys, McGowan believes, is that unlike last year, when stores were enjoying a sales bonanza from everything "Star Wars," there isn't one hot summer movie that's fueling toy sales. Furthermore, new versions of Apple Inc.'s iPods are taking away the toy industry's thunder.
With no must-have in the stores now, uneasy investors are growing pessimistic about the holidays. Of course, toy sellers could be pleasantly surprised -- with consumers putting off buying until late in the holiday season, the hot toys often don't emerge until closer to Dec. 25.
For now, the industry is hoping that merchandise from several summer movies this year will help fill the "Star Wars" gap. It has plenty of merchandise to go with some very high-profile films: Disney-Pixar's "Cars," Walt Disney's "Pirates of the Caribbean: Dead Man's Chest," and Warner Bros.' "Superman Returns."
According to McGowan, sales of "Cars" merchandise, for which Mattel is producing most of the toys, have been stellar. Toys for the "Pirates" movie, most of which are being produced by Zizzle LLC, and products related to "Superman," primarily made by Mattel, are just starting to take off as the movies have either just hit or are soon hitting the theaters. The "Superman" movie opened last week, and the "Pirates" movie is set to open Friday.
And the toy industry is looking way past summer, with ambitious plans to reinvent itself, from expanding into new areas beyond toys to slashing its work force to cut costs. These past few weeks have been unusually busy with a number of marketing and production changes announced by key players.
Last week, privately held retailer Toys R Us Inc. turned to the consumer electronics business for a president of its U.S. toy business, announcing it had hired Ronald D. Boire, who has been executive vice president and global merchandising manager for Best Buy Co. Inc. since 2003.
Meanwhile, Denmark-based privately held Lego Group, whose iconic plastic building blocks have entertained millions of children for more than 70 years, said it would move production from Denmark and the United States to lower-cost countries, resulting in 1,200 layoffs.
Jakks Pacific has been fast diversifying and picking up new businesses. It recently signed a multiyear agreement with HIT Entertainment to make and market a collection of preschool products based on the character Barney.
And Hasbro said late last month it's expanding beyond toys into the world of diapers, teething rings and other baby care products. Its Playskool division, which makes such toys as Weebles and Mr. Potato Head, will be marketing the baby care line for CVS Corp. drugstores.
McGowan believes deals like Hasbro's are a sign that toy companies are looking for alternative signs of revenue. Perhaps, such deals would have been unlikely in better days in the toy world, but he believes, "It's not a sign of desperation."
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