Mattel, Hasbro play catch-up after demand for board games, toys surges

Dive Brief:

Mattel's and Hasbro's supply chains could be chasing demand into next year after the pandemic boosted demand for board games, dolls and toys, the companies' executives said on recent earnings calls.
The two major toymakers said their supply chains are fully up and running, following manufacturing disruptions in various countries due to rolling coronavirus restrictions. But peak season success will be determined by how much demand they can meet as stock levels catch up. In Q3, Mattel's net sales were up 10% YoY while Hasbro's net revenues were down 4% YoY. The companies attributed their results to their abilities to meet demand in surging categories.
Retailers are keeping inventories lower than usual going into the holiday shopping season, due to the uncertainty of the coronavirus pandemic and the shift of consumer spending toward digital channels, said the companies' CEOs.

Dive Insight:

Much like food and beverage companies that have seen a shift in demand from foodservice and restaurants to retail, toymakers experienced an unforeseen shift in demand in the spring and summer. As home entertainment took over the market, demand for board games and toys shot up, and demand for licensed apparel and gear fell.

Mattel CEO Ynon Kreiz said last week that the company is still behind in some categories and cannot be certain it will catch up in Q4.

"This is not impacted by COVID. This is literally all about surge in demand," Kreiz said.

Hasbro CEO Brian Goldner said supply largely caught up in Q3, but Chief Financial Officer Deb Thomas added that the possibility of the pandemic jeopardizing manufacturing in India and beyond still exists. Thomas warned in July that the company may face added costs associated with airfreight to get products into the U.S. for the holidays‚ especially with rates still elevated.

"To the extent we have some shutdowns around the world, we may still be catching up, you know, come Q1," Thomas said.

Hasbro's shipments to retailers fell 24% YoY in Q3, despite sales growth, which Panjiva Senior Researcher Christopher Rogers suspected may still be related to supply chain constraints. Mattel's shipments were up 9% YoY in the same period.

After two quarters in a pandemic, executives expressed confidence in where the demand will come from in Q4. Kreiz said that just 2% of Mattel's retail partners, representing 1% of sales, remain closed due to the virus. But the end-of-year uncertainty stems not from closure but from unpredictable consumer behavior.

Because retailers are keeping inventories tight, the onus to meet demand will be on suppliers to be ready to replenish. The companies' CEOs said their teams are working closely with retailers to fully understand the expected cadence of demand in Q4, as retailers seek to steer customers toward earlier shopping with events and promotions.

"We do not believe there was [pull-forward] as it relates to shipment or consumer demand," said Kreiz. Internal Mattel research says parents' shopping habits will be fairly normal this peak season, with much holiday spending still to come, the CEO said.

But if toymakers will be able to supply it remains the issue. According to Panjiva, the supply chain research unit of S&P Global Market Intelligence, U.S. seaborne imports of toys dropped by 10.6% YoY in September after several quarters of decline. Mattel's inventory was down 5% YoY in Q3, while Hasbro's was down roughly 8% YoY.