Hasbro, Inc. (NASDAQ:HAS) and Mattel, Inc. (NASDAQ:MAT) have recently faced a spate of bad news. This includes the fact that Toys “R” Us Inc, one of their biggest partners, announced last year in September that it would be taking the bankruptcy route. This likely saw the toys retailer struggle during the holiday season which is traditionally supposed to be big in terms of sales. In December Toys “R” Us Inc released its results for the third quarter and they indicated that Christmas sales would be disappointing.
Additionally sales generated from Stars Wars toys experienced a decline last year compared to 2016 despite the fact that a new Star Wars movie was released a little over a month ago. This is a matter of concern for Hasbro as the firm holds a key toys license for the Star Wars franchise. It could also be deduced that movie-based toys have lost their bankability which should be a cause of worry for Mattel as it also sells toys that are tied to movies such as Justice League and Cars 3.
Despite the challenging times for Hasbro and Mattel, a fact which might become evident when their quarterly financial reports are released in the next couple of weeks, the good news is that the two firms have been engaged in efforts aimed at reshaping their businesses with a view to addressing the various threats and problems to their business model.
In the case of movie tie-ins for instance, the two companies are adapting to a world where the relevance of the big screen is fading as online-streaming grows. The chief executive officer of Mattel, Margot Georgiadis, has for instance indicated that the company is prioritizing on strategies that recognize the fact that mobile devices will be the dominant interfaces from which entertainment content will increasingly be consumed.
In that regard the firm is working on the production of more digital content for its Hot Wheels and Barbie brands. Hasbro has also made an investment of $535 million towards the development of digital content in the last eight years.
But even as the two firms navigate a changing environment speculation is also rife that they will merge. In the recent past this has seen the share price surge in the absence of any material announcement.