2020 performance of Mattel, Hasbro and Jacks.
Editor’s note: This article is from the micro-channel public number “three entertainment” (ID: hi3wyu), Author: Jace.
At the end of February, the world’s three largest toy companies Mattel, Hasbro, and Jacks Pacific have successively released their 2020 fourth quarter financial reports. All three companies achieved a certain degree of growth in the fourth quarter, but their growth rates and motivations were all significantly different.
Mattel’s earnings report performed well this time. Calculated at a constant exchange rate, net sales in the fourth quarter of 2020 increased by 10%-this is the first quarter with the highest year-on-year increase in net sales since 2016. The adjusted gross profit margin reached 51.4%, an increase of 250 basis points. The adjusted fourth quarter operating income reached 205 million US dollars, an increase of 95.7 million US dollars over the same period last year, an increase of 88%.
From the perspective of the whole year, Mattel’s net sales reached US$4.584 billion, an increase of 3%, and the gross profit margin reached 49.1%. It reached an operating income of 448 million, an increase of 187%. The various toy products produced by the company have contributed to driving revenue growth. Among them, doll products performed the most. Driven by the continuous increase in sales of “Barbie” and “American Girl”, the total sales of doll products increased by 13 %, became the company’s main driving force to drive revenue.
Jacks Pacific’s fourth quarter 2020 financial report also shocked shareholders. Since 2013, Jacks’ revenue in the fourth quarter has increased for the first time, with annual operating revenue of US$12.91 million, reaching the highest level since 2016. The gross profit margin in the fourth quarter was 32.8%, a year-on-year increase of 240 basis points in the fourth quarter of 2019, and also reached the highest level since 2016.
Although Jacks’ net sales in the fourth quarter were US$128.3 million, down 16% from US$152.5 million in the same period last year, it was mainly affected by the decline in sales of “Frozen” related products. As the movie was released in 2019, related products contributed to the strongest sales revenue of the quarter. After removing Frozen related products, Jacks’ sales in the fourth quarter of 2020 increased by 13%.
Several companies are happy and sad, but Hasbro’s 2020 does not look so exciting. Although operating income reached 1.723 billion U.S. dollars in the fourth quarter, a 4% increase compared to the same period last year, for the whole year, Hasbro’s operating income was 5.465 billion yuan, an 8% decline compared to 2019 . Net income in the fourth quarter was US$105 million, an increase of 10% year-on-year. The net income of the year was US$222 million, a decrease of 36% compared to 2019.
Hasbro’s annual revenue is largely due to the adverse effects of the first half of the epidemic, but from the growth trend in the fourth quarter, there has been a trend of recovery. In particular, the game business is gaining momentum. In the fourth quarter of 2020, the entire game category increased by 27% year-on-year, and achieved a 15% growth throughout the year.
Mattel: All categories have grown against the trend, and the veteran Barbie’s vitality is still strong
Mattel’s products are mainly divided into four categories: dolls, baby toddlers and preschool education, cars and activity figures, building blocks, games and other categories.
The sales growth rate of doll products is the most significant, reaching 13%. This is due to the continuous promotion of the two major brands “Barbie” and “American Girl”. Among them, the sales of girls in the United States increased by 9% year-on-year, which is the first time the toy has achieved growth in four years. The Barbie dolls, which have been available since 1959, are still in strong demand, with a growth rate of 18% during the quarter.%, sales reached 471 million U.S. dollars, and annual cumulative sales were 1.305 billion U.S. dollars, more than 50% of the total sales of this category. According to NPD data, Barbie dolls occupy the world’s number one toy in the fourth quarter of 2020 and throughout the year.
The growth performance of car toys followed closely behind. At a constant exchange rate, the fourth quarter achieved a 12% growth. Among them, “Hot Wheels” toys performed strongly, bringing in sales of 346 million U.S. dollars in the fourth quarter, accounting for nearly 90% of the total sales of this category, an increase of 14%, and total annual sales of 954 million U.S. dollars ——This is the third consecutive year that the brand’s toys have set a new sales record, and its sales are second only to Mattel’s Barbie doll series. According to NPD data, in terms of a single classification of car toys, Hot Wheels remains the world’s number one toy in the fourth quarter of 2020 and throughout the year.
Baby toddlers and preschool toys contributed to Mattel’s second largest sales. At a constant exchange rate, sales increased by 7% in the fourth quarter, mainly due to “Fisher” and “Thomas and his friends “Our” two major toy sales. The above two toys sold 372 million U.S. dollars in the fourth quarter, and the cumulative annual sales were 1.065 billion U.S. dollars. Their popularity is comparable to that of Barbie and Hot Wheels. The three strong brands keep hand in hand and together constitute 66% of Mattel’s toy sales in 2020.
From the perspective of regional revenue, Mattel has achieved sales growth in all four regions of the world after excluding the influence of exchange rate fluctuations. Perhaps thanks to the strong and powerful climate created by the holiday effect at the end of the year, all except Latin America achieved high double-digit growth.
North America is still the main area of commodity demand, generating 829 million revenue in the fourth quarter, an increase of 13%. The EMEA region (Europe, Middle East, Africa) market performed strongly, with sales increasing by 12% year-on-year. According to NPD data, Mattel increased its market share in the EMEA region in 2020. Therefore, the sales share of this region rose from third in 2019 to second.
The income of the Asia-Pacific region is affected by Australia’s economic growth.Promoted, achieved 8% sales growth. The retail market environment in Latin America has improved and many stores have reopened. Thanks to this, sales have also achieved a small increase of 3% at a constant exchange rate.
Mattel’s performance is outstanding on a global scale, and company executives can hardly hide their joy. Mattel Chairman and CEO Yinon Kreis said: “This is the company’s best quarter for many years. In the raging epidemic and challenging market environment, our performance has exceeded expectations. Revenue has risen sharply again, and profitability has increased significantly…I am extremely proud of the entire Mattel global team.”
The epidemic of the new coronavirus is a common problem faced by the global retail industry in 2020. After experiencing the permanent closure of retail stores and a sharp decline in the passenger flow of flagship stores, Mattel still created unexpected growth against the trend. On the one hand, it is due to the strength in the e-commerce business. Maintaining the momentum of growth, Mattel’s e-commerce sales increased by 40% compared to last year, and products sold through e-commerce channels accounted for approximately 36% of total wholesale sales.
On the other hand, there are direct-to-consumer sales strategies that have been successful. The American girl series of toys has achieved sales growth in the first quarter since 2016, with 75% of its revenue generated through direct-to-consumer business. The business compensated for the growth of retail business by activating new customers, increasing average order value and conversion rate.
Hasbro: Game business grows 15%, North America stands out
Hasbro’s 2020 is not so good. The 4% increase in operating income in the fourth quarter failed to reverse the decline for the whole year. For the year, operating income fell by 8%, and operating profit fell by 1%.
From the perspective of brand portfolio, Hasbro’s growth in the fourth quarter was boosted by its franchise brands, game business and the resumption of production of TV movies.
Franchise brands achieved 705 million sales in the fourth quarter, a year-on-year increase of 7%, mainly including the “Magic”, “Monopoly” and “Heat” series toys. The performance of co-branded brands has declined by 14% compared to last year, but the “Star Wars” collaboration with Lucasfilm has partially offset the loss due to the decline in “Frozen” revenue. TV and movies were affected by the epidemic in the first half of the year and resumed production in the second half of the year, thus achieving a year-on-year growth of 20%.
The gaming business performed very well throughout the year. In the fourth quarter, revenue was 561 million, an increase of 27% year-on-year. The total revenue of games for the year was US$1.76 billion, an increase of 15% compared to last year. “”Magic: The Gathering” and “Monopoly” are the company’s most significant growth games and also belong to franchise brands.
In terms of business divisions, Hasbro has four main business segments: the United States and Canada; international; entertainment, licensing and digital; and eOne business. Among them, the United States and Canada, and the international sector are respectively responsible for the toy and game business in North America and overseas regions, and the international business includes the three major sectors of Europe, Latin America and the Asia-Pacific. The Entertainment, Licensing and Digital Department is responsible for the licensing of TV, movies, and consumer products. The eOne business is the business of the former world-renowned entertainment company Entertainment One (eOne), which was acquired at a price of 3.3 billion pounds (approximately RMB 28.5 billion) in August 2019. The company sits on well-known hot spots such as “Little Pig Page” IP.
In 2020, the U.S. and Canadian divisions contributed the most to Hasbro’s growth, with a 16% increase in the fourth quarter and a 4% full year growth. At the same time, operating profit increased by 30%. This is mainly attributed to Hasbro’s franchise brand led by “Magic: The Gathering” and the pulling effect of the game business.
The international business transcript is far less beautiful than North America. The performance in Europe was basically flat throughout the year, while performance in Latin America and the Asia-Pacific region declined. The Latin American market is quite challenging. Affected by the epidemic, retail stores have closed, and the toy and game market has narrowed. The fourth-quarter performance fell 36% and the full-year revenue fell 45%.
The entertainment, licensing and digital sectors, as well as the performance of the eOne sector, were also frustrated in the epidemic. Due to the limited production of live-action movies and the closure of movie theaters, TV and movie revenues have fallen. When the wind of film and television promotion weakened, the sales of its IP-licensed consumer products could not take off easily, further exacerbating the decline in revenue.
The downturn in the licensed film and television entertainment business is undoubtedly evident in content spending. Hasbro’s Chief Financial Officer Deb Thomas revealed in the earnings conference: “The company’s cash expenditure on content for the full year of 2020 is US$439 million, slightly lower than the lowest expected level. As content production resumes, Children’s Zhibao plans to spend on live performances, animated TV and movie content in 20216.7.5 billion to 750 million US dollars. “
Jacks Pacific: The big IP fever fades, cut costs and maintain profit margins
Jacks’ products are mainly divided into four categories: toys for girls, toys for men, seasonal products including ball pools, outdoor games, and Halloween cosmetics. Regardless of the type of product, Jacks does not have independently developed IP, but uses the authorization of well-known IP to produce products.
Girls’ toys, including dolls, cosplay, preschool toys, etc., have net sales of US$73 million in the fourth quarter of 2020, a 28% drop from last year’s US$101.8 million. This is largely due to the decline in popularity of the famous IP “Frozen” and the impact of the decline in sales of related products. Excluding this series of products, under the boost of toys such as Disney princesses and cute babies, the sales of girls’ toys in 2020 will increase slightly by 2%.
Net sales of boys’ toys are also about the popularity of cooperative IP. The popularity of video game IP during the epidemic has led to Jacks’ toy products. With the positive contribution of Nintendo’s Mario Bros. and Sega’s Sonic the Hedgehog series, which increased 74% year-on-year, Nantong products achieved sales of US$26.6 million in the fourth quarter, an increase of 12% year-on-year.
Halloween decorations ushered in more than expected growth in the fourth quarter, with sales reaching 7.2 million US dollars, which was only 3.8 million US dollars last year, an increase of 91% year-on-year. This may be due to the impact of the new crown epidemic, consumer holiday shopping plans have been disrupted, and consumption has been delayed.
Compared with companies such as Mattel, Jacks, which has its own unoriginal IP, is obviously more passive. The sales of its products are largely affected by the heat of the cooperative IP, and not all can be controlled by itself. Looking at the reasons for the decline in net sales throughout the year, most of the reasons for the decline in the popularity of the original “Frozen” and other well-known IPs have not been replaced by strong emerging IPs.
Jacks is clearly trying to avoid such negative effects. The gross profit margin of 32.8% in the fourth quarter of 2020, the highest level in the past 10 years, is also due to the significant reduction in copyright fees. On the one hand, Jacks shifted production to products with lower copyright costs, and on the other hand, it also benefited from the expiration of some less favorable cooperation terms. In the fourth quarter, a large number of products were removed from the original inventory, so the decline in sales failed to adversely affect the company’s profits.
Future
202The challenge of 0 years has come to an end, and 2021 is slowly unfolding. Mattel’s card game UNO’s live-action film is being developed with Grammy-nominated rapper Lil Yachty. The new series of animations for “Thomas and His Friends” will also be available on Netflix and Cartoon Network this fall. And Hasbro announced that it will increase investment in animation, TV and movie content. Jacks is aiming at the rising momentum of Disney+ streaming media and video games, hoping to use the latest cooperation authorization to launch more abundant new products.
Several major toy companies have their own magical powers. Whether it is Mattel and Hasbro, which create original content by themselves, or Jacks, which cooperates with well-known content companies, they all play the same way-first occupy the children’s Heart, then put the character dolls and costume props into the consumer’s home. The hot products are driven by the well-known IP, at this point, toy companies have reached a consensus.