Toys ‘R’ Us bankruptcy hangs over toymakers as holidays approach

Bloomberg

When Toys “R” Us Inc. filed for bankruptcy last month, it vowed to keep operating stores, boosting investor optimism that the impact on the biggest toymakers this holiday season would be limited.
But with Hasbro Inc.’s weaker-than-expected sales forecast and Mattel Inc.’s revenue trailing projections— and both companies citing Toys “R” Us as a key reason—the retailer’s struggles are looming large with Christmas less than two months away.
“We did have a real challenge with the timing of that bankruptcy,” Mattel Chief Executive Officer Margo Georgiadis said. “The whole industry felt the pressure.”
Mattel and Hasbro, combined, lost almost $800 million in market value this week. Toys “R” Us is their second-largest customer after Wal-Mart Stores Inc. Shares of smaller toy companies Jakks Pacific Inc. and Spin Master Corp. also fell.
The toymakers significantly reduced shipments in September as Toys “R” Us teetered on the brink of filing. The retailer has said it plans to exit bankruptcy after lessening its heavy debt load.
Mattel’s sales plummeted 22 percent in North America, and the company said half of that drop came from fewer shipments to the toy chain and delays on payments. That knocked the stock down as much as 17 percent, and cast more doubt on its three-year turnaround. The company has stopped providing quarterly guidance, and declined to weigh in on what this could mean for the fourth quarter.
Hasbro blamed uncertainty surrounding Toys “R” Us and weakness in key markets like Brazil and the UK.