Toymakers Tout Twists on Favorites, Items Tied to Movies

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Mark Lennihan/APMattel next year plans to introduce toys from the hit "Frozen" -- Anna, Elsa and Olaf.
The country's two leading toymakers aren't going to be playing around this holiday season. Mattel (MAT) and Hasbro (HAS) are hoping that new technologies and popular franchises will make them big winners later this year, and they were able to talk up their prospects during this month's quarterly reports.

Kids can be as fickle as their parents, and these days it's hard to resist the temptations of new gadgetry. Children crave electronics, and we're not just talking about tablets, portable media players, smartphones, and wearable computing gizmos. These initial purchases find them feeding off the digital ecosystems created by the titans of techs.

One can argue that the new toymakers are the world's largest technology and video game companies, and that has made things somewhat challenging for Hasbro and very challenging for Mattel. The two companies just reported fresh financials, discussing potential catalysts for a strong holiday showing.

Mind Over Mattel

Mattel reported another quarter of uninspiring financials last week. Revenue may have climbed 5 percent over the prior year's quarter on a constant currency basis, but the results were padded by the acquisition of the Mega building blocks that was completed last April. Mattel's Barbie sales declined by 5 percent, and American Girl -- the high-end doll line that initially helped offset weakening Barbie demand -- was flat.

More importantly, Wall Street's forecasting that Mattel's top line will be going the wrong way for the rest of the year. Analysts see Mattel's revenue slipping 2 percent for all of 2015 with earnings taking a similar step back.

Mattel has a few secret weapons in its arsenal. For starters it turned heads this year with a talking Barbie at a toy fair earlier this year. Hello Barbie is a Wi-Fi-tethered doll that uses voice recognition software to engage in a somewhat fluid conversation. It should hit the market ahead of the holiday shopping rush. But, it won't be cheap. The initial price being reported is roughly $75. However, why not deploy Siri-like technology into an iconic doll line that's been dying for a chance to speak up. During last week's call, the company mentioned that Thomas the Tank Engine could be next to get the Hello Barbie makeover.

Another interesting rebirth that Mattel is betting on is View-Master. The classic toy with photo reels has been around for more than 75 years, but now Mattel is teaming up with Google (GOOG) (GOOGL) for a plaything that can be paired with a compatible Android smartphone to deliver visual field trips with sweeping 360-degree vistas.

Hasbro Holds Up Better

Hasbro delivered a more encouraging report on Monday morning. It would have posted a 14 percent year-over-year uptick in revenue adjusted for foreign currency fluctuations, with healthy growth in three of its four product categories. Its lone retreat was in its toys for girls, as demand for Furby, Easy Bake ovens, and Furreal Friends waned.

Hasbro's success -- and it's why the stock went on to hit new highs after this week's report, unlike Mattel trading near its lows -- has come mostly from its proprietary toy lines including Transformers, My Little Pony, and G.I. Joe that it can milk across multiple media platforms.

Hasbro's success heading into the holidays should be helped by its licensed Marvel and Star Wars lines as both of those franchises have big movies coming out later this year. It should also get a boost with Jurassic World, and an in-house pop from a new Devastator figure from its Transformers juggernaut that it debuted during this year's New York Toy Fair. A rebound in its girls products may have to wait until next year when Hasbro rolls out a new line of Disney Princess and Frozen lines, but there will be enough ammo with its action figures to keep the good times coming.

The leading toymakers aren't going away. Hasbro has momentum on its side, and Mattel is hoping that giving its old toys some new tech tricks can make it matter during the critical holiday shopping season this year.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Google (C shares) and Hasbro. The Motley Fool owns shares of Google (C shares) and Hasbro. Try any of our Foolish newsletter services free for 30 days. Check out our free report on one great stock to buy for 2015 and beyond.
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