Paul Cerro's avatar
$37.3m follower assets
Hasbro and Mattel earnings show some categories are more recession-proof than others
The news: Hasbro $HAS and Mattel $MAT each reported revenue growth in Q2 as demand for toys remained unaffected by inflation and a possible recession.

Hasbro stays optimistic: Despite higher input and freight costs, Hasbro says it’s in a “strong position” to hit its targets for the year.
  • While Q2 revenues grew just 1% year-over-year (YoY) due to a strong dollar, the company’s adjusted operating profits improved by 200 basis points, helped by raising prices.
  • However, inventory levels for the first half of the year were 73.6% higher YoY as Hasbro stocked up to circumvent potential supply chain delays.
  • Hasbro expects full-year revenue growth in the low single digits.

Mattel’s profit slips: Mattel’s stable of iconic brands and lucrative merchandising deals helped it grow sales by 20% YoY, to $1.26 billion.
  • But those partnerships took a toll on profits, as the toy company’s reported gross margin declined by 310 basis points in part because of increased royalty expenses.
  • Like Hasbro, Mattel used pricing to offset higher supply chain and materials costs.
  • The company expects sales to grow 8% to 10% this year.

The importance of IP: A key reason for both companies’ continued strength is their intellectual property holdings.
  • Mattel has repositioned itself as “an IP-driven high-performing toy company,” per CEO Ynon Kreiz, using high-profile deals with Disney, Nickelodeon, Trolls Entertainment, and other media giants to grow market share.
  • Hasbro’s growth was driven mainly by higher sales for its franchise brands—which include familiar names like “Peppa Pig” and “My Little Pony”—as well as increased sales for its Marvel and Star Wars products.

A bullish outlook: Both Marvel and Hasbro downplayed the impact of a potential recession, noting that their category is largely resilient to downturns.
  • Hasbro CEO Chris Cocks said that toys, games, and entertainment “tend to be small luxuries” that customers feel comfortable indulging in.
  • Kreiz said on Mattel’s earnings call that the company’s internal research found “most shoppers plan on spending the same or more on toys in 2022” compared with last year when they still had access to stimulus money.
  • We expect toy and hobby sales to grow 6.4% this year to $199.05 billion.

The big takeaway: The resiliency of the toy category makes it an attractive area of investment for retailers, particularly those like Target and Macy’s that are struggling to adapt to shifting consumer demands.

  • Macy’s is bringing Toys R Us-branded shops to all of its US stores to help it attract more dollars this holiday season.
  • Sustained interest from US retailers could help Mattel and Hasbro mitigate the effects of a strong dollar.
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Paul Cerro's avatar
$37.3m follower assets
Hasbro and Mattel earnings show some categories are more recession-proof than others
The news: Hasbro $HAS and Mattel $MAT each reported revenue growth in Q2 as demand for toys remained unaffected by inflation and a possible recession.

Hasbro stays optimistic: Despite higher input and freight costs, Hasbro says it’s in a “strong position” to hit its targets for the year.
  • While Q2 revenues grew just 1% year-over-year (YoY) due to a strong dollar, the company’s adjusted operating profits improved by 200 basis points, helped by raising prices.
  • However, inventory levels for the first half of the year were 73.6% higher YoY as Hasbro stocked up to circumvent potential supply chain delays.
  • Hasbro expects full-year revenue growth in the low single digits.

Mattel’s profit slips: Mattel’s stable of iconic brands and lucrative merchandising deals helped it grow sales by 20% YoY, to $1.26 billion.
  • But those partnerships took a toll on profits, as the toy company’s reported gross margin declined by 310 basis points in part because of increased royalty expenses.
  • Like Hasbro, Mattel used pricing to offset higher supply chain and materials costs.
  • The company expects sales to grow 8% to 10% this year.

The importance of IP: A key reason for both companies’ continued strength is their intellectual property holdings.
  • Mattel has repositioned itself as “an IP-driven high-performing toy company,” per CEO Ynon Kreiz, using high-profile deals with Disney, Nickelodeon, Trolls Entertainment, and other media giants to grow market share.
  • Hasbro’s growth was driven mainly by higher sales for its franchise brands—which include familiar names like “Peppa Pig” and “My Little Pony”—as well as increased sales for its Marvel and Star Wars products.

A bullish outlook: Both Marvel and Hasbro downplayed the impact of a potential recession, noting that their category is largely resilient to downturns.
  • Hasbro CEO Chris Cocks said that toys, games, and entertainment “tend to be small luxuries” that customers feel comfortable indulging in.
  • Kreiz said on Mattel’s earnings call that the company’s internal research found “most shoppers plan on spending the same or more on toys in 2022” compared with last year when they still had access to stimulus money.
  • We expect toy and hobby sales to grow 6.4% this year to $199.05 billion.

The big takeaway: The resiliency of the toy category makes it an attractive area of investment for retailers, particularly those like Target and Macy’s that are struggling to adapt to shifting consumer demands.
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A Weekly Update on Happenings in Special Situations
Three highlights:

  • Argo Group $ARGO announced exploration of strategic alternatives and delayed its AGM (Filing); I reported on this rumor in Report #12
  • Mattel $MAT exploring a sale and has talked with firms including Apollo $APO and L Catterton (Wall Street Journal)
  • Suncor Energy $SU activist Elliot Management called for new board directors, an overhaul of management, and the initiation of a strategic review (Press Release)

Alberto Wallis's avatar
$23.4m follower assets
Insights on Ad Spend
Advertising has been a hot topic lately, with several factors impacting the industry. The latest Fincredible Macrotalk analyses company earnings calls to highlight the current trends of the ad industry. Here are six quotes that help understand the complexities the ad industry is experiencing.

Ad Sellers:

Ad Buyers:

The Earnings Beat Goes On: Daily Contrarian, Feb. 9
Good morning contrarians! Stock futures are green for a change, continuing the rally from yesterday. The Nasdaq is leading things, up 0.9% as of 0645. The S&P 500 is up 0.7% with Dow Industrials 0.5% to the good. The Russell 2000 which tracks small caps is up 0.4%.

Bonds are holding steady, with the 2-year yield at 1.32% and the 10-year at 1.92%.

Commodities aren’t doing much either. WTI crude is down about 0.7% to trade around $89/barrel. Gold is unchanged at 1,827/oz. Natural gas is continuing to drop though, down 2% to get closer to the $4 level (currently $4.17).

Cryptos are flat. Bitcoin is down about 1% to trade around $43,500.

Earnings
In the after market we had good news from Chipotle ($CMG), which has rallied, and bad from LYFT ($LYFT), whose shares have been punished.

CVS Health ($CVS) just reported, beating earnings and revenue estimates. The stock is up 1% in the pre-market.

CME Group ($CME), Fox Corp ($FOXA), GlaxoSmithKline ($GSK), Yum Brands ($YUM) also report before the open at 0930.

The after market should be interesting again. Uber ($UBER) is expected to report at 1600, followed by Sonos ($SONO), Vimeo ($VMEO), and Disney ($DIS). We’ll also get Twilio ($TWLO), Mattel ($MAT), Zynga ($ZNGA), and MGM Resorts ($MGM) after the close.

The Bottom Line
A lot of volatility has left the market this week. Doesn’t mean it won’t return of course, but things are noticeably calmer. Futures being bright green was a cause for concern during the high vol days of last week and the week before, but it’s difficult to see where the catalyst for ‘risk-off’ could come from. Earnings don’t get interesting until after the close.

Yesterday's bottom line told you it was looking like a blah day but to keep an eye out because those days often turn out to be the most interesting. We ended up getting a rally in risk assets, with the Dow, Nasdaq and Russell all adding north of 1%. This may be a good indication the bull market is alive and well (which it is statistically, anyway) as stocks tend to rally for no good reason during bull markets.
Alberto Wallis's avatar
$23.4m follower assets
Upcoming Earnings Calendar (Feb 7th - 11th)
Hey guys!

A key week is ahead of us! Here's what I'm interested in:

  • $APPS - One of my largest holdings. I'd like an update on the progress of single-tap and the tests they were running with Meta $FB. I'm also interested in seeing how their device footprint is expanding after their latest deals.
  • $DIS - They've invested heavily on Marvel and Star Wars series for Disney+, so let's see if this translates to lower churn and higher growth.
  • $NET - Really interesting stock but the valuation seems too high. Let's see if there's a good opportunity to enter post-earnings.

Good luck!

If you'd like an easier way to track earnings dates, you can automatically sync your portfolio's earning dates to your personal calendar with just a couple of clicks here.

MON:

TUE:

WED:

THU:

FRI:
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Featured earnings for the week of Oct 18
Earnings season (finally) getting into full gear!

So many interesting companies announcing earnings next week. Here are is the Fincredible Featured list. View all here.

Here are some I own / or particularly interested in

$JNJ - very interested to see results in the medical devices segment. Specifically are their signs of closing the gap with $ISRG with their new platform and are elective surgeries coming back

$ISRG - flip side of the $JNJ narrative. I love it when competitors announce close to each other :)

$NFLX - international subscriber numbers

$T - update on discovery spin-off, dividend and 5G capex

$XM - $MNTV is my top 3 holding based on thesis they are making inroads in enterprise market, which $XM dominates. Big enough market for both but want some context.

A few companies like $PG on inflation numbers, but I suspect @awallis will be kinda enough to provide a MacroTalk update on this topic again

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Eric Pelnik's avatar
$284.6m follower assets
Some earnings this week:
Monday, July 20th
$IBM IBM

Tuesday, July 21st
$UAL United Airlines
$AMTD TD Ameritrade
$IBKR Interactive Brokers
$KO Coca-Cola
$UTX Raytheon
$LMT Lockheed Martin
$SNAP Snap
$PM Philip Morris

Wednesday, July 22nd
$SAVE Spirit Airlines
$PCG PG&E
$CMG Chipotle Mexican Grill
$MSFT Microsoft
$TSLA Tesla
$WIX Wix.com

Thursday, July 23rd
$ALK Alaska Air Group
$AAL American Airlines Group
$LUV Southwest Airlines
$T AT&T
$RCL Royal Caribbean Cruises
$TSCO Tractor Supply
$ETFC Etrade
$CTXS Citrix
$MAT Mattel
$TREE LendingTree
$VRSN Verisign
$TWTR Twitter

Friday, July 24th
$AXP Amex
$GT Goodyear
$VZ Verizon

Source: Yahoo Finance
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