If you read the latest reports from Mattel and Hasbro you cannot help but notice that international toy sales are playing an increasingly greater role in the financial health of those companies. Many toy companies see foreign sales as an exotic part of the business. It is something to do, say… someday in the future… but not now.
Based upon what we are seeing from these toy industry leaders, however, the future appears to be now. Consider this: Hasbro’s international sales were up 43% as opposed to a 14% gain in the US. In fact, international sales were, for the first time in the company’s history, higher than domestic sales in the fourth quarter.
Take a look at Mattel’s sales of Barbie products and you will see that they were up 20% internationally while remaining flat in the US. Even sales of movie tie-in were stronger abroad. Mattel’s highly successful Entertainment unit led by Cars2 generated stronger sales internationally than domestically (+45% compared to +37%).
It’s not just the Mattel and Hasbro that are benefiting from international sales. Gerrick Johnson, financial analyst for BMO Capital had this to say about JAKKS:
International sales once again outpaced domestic sales, growing by 18% (vs, 5% in the US). The absolute level of international sales is still low, just 17% of sales in the quarter (18% YTD), but growing. Part of our bullish case for JAKK is that it is growing its ability to directly service more international geographies. We think there is a lot of low-hanging fruit to be harvested. Currently, companies we cover in the toy industry average about 35% of sales from international markets, with larger companies like Mattel and Hasbro in the 45%-50% range.
Based upon the current challenges in the US toy market, smart toy companies will want to seriously consider going abroad. But what are the risks; that in my next posting.