COVID-19 drove 16% development in toy gross sales final yr
As parents looked for ways to keep children happy and busy during the COVID-19 pandemic, the toy category flourished. According to the NPD Group, sales grew 16% to $ 25.1 billion in 2020.
“Sports toys,” including scooters and ice skates, “fashion dolls” such as MAT by Mattel Inc., -3.81% Barbie dolls, and seasonal summer toys were hot sellers during the year.
“Much of the growth in 2020 was directly related to the COVID-19 pandemic and changing consumer behavior, which included widespread closings and school closings, disposable income diverted from other types of entertainment to toys, and onset was linked by federal economic reviews, “said NPD in its report.
Sales remained unchanged from last year through March, then began to surge when widespread lockdowns took place, and continued to rise as stimulus checks hit consumers’ bank accounts.
Sales in May were up 38%, and in October, when Amazon.com Inc.’s AMZN, a -1.39% Prime Day event, hit it was up 33%.
“The resilience of the industry is largely underpinned by the fact that families rely on toys during difficult times to keep their children busy, active, and excited,” said Juli Lennett, US toy industry advisor for NPD Group , in a statement.
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“Simply put, toys are a big part of the happiness equation.”
The results were actually a little unexpected.
“As recently as 10 months ago, we were investigating the real possibility that the industry could be hit by catastrophic losses, as there was no way to gauge how the home orders and supply chain disruptions would affect,” said James Zahn. Managing Editor of The Toy Insider.
Though things went very differently, Zahn says the industry has felt some pain.
“One area of concern is that the excellent numbers may not tell the full story, as much of the growth has benefited the largest retailers in the game,” he said.
“A lot of independent stores didn’t survive the year and we are already seeing some small stores close this year. I know of five retail stores that just closed this week. “
The effects on smaller businesses are the same as in the hospitality industry. The National Restaurant Association reported 110,000 closings due to the pandemic.
Zahn says there will be new toys in 2021, but retailers and toy companies should keep in mind that some stores won’t repeat themselves.
“I would expect to see some declines in certain categories over the course of the year as larger purchases like swings and playhouses are one-offs for most families and have already happened last year,” he said.
“Also, Games and Puzzles have had a tremendous year and should gradually taper off as soon as we see some increases in licensed products launched through 2021 after a delay last year.”
Stifel Analysts Are Upbeat About Hasbro Inc. HAS, -2.46%,
The results for the fourth quarter are expected to be published on February 8th.
“[Hasbro] is set up for a 21 earnings rebound scenario (which we believe will serve as the reason to own the shares), backed by eOne cost synergies, a stronger entertainment palette and simpler 1H comps, ”analysts write.
Stifel rates Hasbro shares with a price target of $ 115.
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MKM Partners notes that Hasbro has 10 feature films in 2021 compared to none in 2020, including films based on Marvel characters. Some of the names that hit theaters this year are Black Widow and Spider-Man.
The Magic: The Gathering Arena video game for mobile devices is also coming this year, MKM said.
MKM rates the purchase of Hasbro stock with a price target of $ 114.
MKM analysts are also bullish on Mattel, which is due to release its fourth quarter results on February 9th.
“Mattel is very likely in a good position to start 2021 as retail inventory levels remain subpar and manufacturing / supply chain problems should no longer persist in 2020,” wrote General Manager Eric Handler.
“Management’s recovery efforts should fully resume in 2021. Revenue is expected to grow for the first time since 2013 and the operating margin will be in double digits.”
MKM rates Mattel stock as neutral with a fair value estimate of USD 19.
Hasbro stock is up 10.2% over the past three months, despite falling 9.5% over the past year.
Mattel stock is up 20% in the past three months and is up 21.3% in the past 12 months.
The benchmark index S&P 500 SPX (-1.62%) is up 11.9% over the past three months and 17% over the past year.