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Assessing The Toys 'R' Us Liquidation's Impact On Hasbro, Mattel And JAKKS

Assessing The Toys 'R' Us Liquidation's Impact On Hasbro, Mattel And JAKKS
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While it didn’t come as a surprise, the Toys R Us bankruptcy was sent toy manufacturers scrambling to recoup potentially significant losses after it was announced that the company will close all of its stores.

Earlier this month, BMO Capital Markets analyst Gerrick Johnson told Benzinga that toy giants Mattel, Inc. (NASDAQ: MAT) and Hasbro, Inc. (NASDAQ: HAS) are "being proactive and getting their affairs" in preparation for the store shutdowns. 

In a new report, Johnson said he's expecting the disruption to the industry and the companies under coverage “to be greater than originally anticipated." 

With liquidation set to begin immediately and targeted for completion by July 31, the analyst said the outcome of the sale process for international stores is unknown until mid-April, and it is still unclear what any buyer will do with the stores.

For Hasbro, Johnson reduced the 2018 net revenue estimate by $107 million to $5.104 billion. In 2019, 75 percent of lost Toys R Us sales will be made up elsewhere, the analyst said. BMO maintains a Market Perform rating on Hasbro with a price target lowered from $96 to $83.

The impact on Mattel is expected to be larger. Johnson lowered the 2018 net revenue estimate for the toymaker by $150 million to $4.642 billion. BMO expects a drop in revenue from $5.264 billion to $5.218 billion in 2019. Johnson maintains an Outperform rating on Mattel but lowered the price target from $23 to $17.

JAKKS Pacific, Inc. (NASDAQ: JAKK) is expected to be adversely impacted by Toys R Us' demise, with 2018 net revenues reduced by $20 million to $620 million. In 2019, BMO projects that net revenue will fall by $7 million to $653 million. The firm maintains a Market Perform rating on Mattel with a $2.50 price target.

Related Links:

Buy Hasbro As Toys 'R' Us Liquidates, Says KeyBanc Analyst

What The Toys 'R' Us US Liquidation Means For Toy Makers

Photo by Michael Rivera/Wikimedia. 

Latest Ratings for MAT

Aug 2018UBSMaintainsNeutralNeutral
Aug 2018CitigroupMaintainsBuyBuy
Aug 2018JefferiesMaintainsHoldHold

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