By Tonya Garcia
Mattel Inc. stock jumped nearly 9% in early Wednesday trading before settling at a 4.3% rise for the day after it announced that it has won the license to sell Disney Princess dolls and those based on the animated “Frozen” film from rival Hasbro Inc.
Mattel (NAS:MAT) will start selling the Disney toys in 2023.
“We are incredibly proud to welcome back the Disney Princess and Frozen lines to Mattel,” said Richard Dickson, Mattel’s chief operating officer in a statement.
The Disney Princess lineup will include dolls based on “Beauty and the Beast,” “Brave” and “The Little Mermaid.” Mattel already had a deal with Disney for the Pixar Animation Studio “Toy Story” and “Cars” franchises.
According to a report from The Wall Street Journal , the group that managed the Barbie revival lead the effort behind the new dolls. Mattel lost the license to the Disney Princess lineup in 2016; a period of instability followed, notes the WSJ.
Mattel stock has gained 10% over the past year.
Hasbro (NAS:HAS) stock fell 6.1% in Wednesday trading after the news. That company’s brands include Nerf, Peppa Pig and the Monopoly board game.
Hasbro announced Wednesday that it has renewed its license deal with Lucasfilm for the Star Wars lineup, which is under the Disney umbrella, and has expanded its relationship to include a line of Indiana Jones toys. The Indiana Jones line will be available in the U.S. in 2023.
“Hasbro is proud to maintain a strong connection with Disney, the creator of some of the most celebrated and everlasting entertainment franchises and looks forward to continuing its storied relationship with new product lines for Star Wars, Indiana Jones, Marvel and many more initiatives in the future,” the company said in a statement.
“Overall, we see this news as a bigger positive for Mattel, than a negative for Hasbro,” wrote Stifel in a note. Analysts say they’re not surprised by the development.
“[W]e see this as a slight negative for Hasbro as the Disney Princess and Frozen franchises contributed hundreds of millions in annual revenue at an attractive gross margin. But our sense had been that the license had underperformed expectations,which may have made it more difficult to retain.”
Analysts say the LucasFilm partnership eliminates the risk that Hasbro will lose another partnership.
“The Disney Princess and Frozen franchises are evergreen properties that further solidify the company’s strong competitive position in the doll category,” the note says.
“Furthermore, the move validates Mattel’s improving financial condition, in our opinion, as we suspect there are minimum guarantees and a 20%+ royalty rate attached to the license.”
D.A. Davidson maintained its buy stock rating on Mattel and raised its price target by $2 to $38. Analysts also maintained their buy rating on Hasbro and lowered its price target by $2 to $138.
“We have heard criticism of Hasbro in the industry, with some saying the quality of the Princess dolls was inferior to Mattel’s fashion dolls, especially the facial features; Hasbro historically has been more dominant in action figures and boys’ toys, whereas Mattel’s competencies are strongest in dolls and girls’ toys,” wrote analysts in a Mattel note.
“We think Hasbro management’s focus on gaming and entertainment may be compromising the performance of its toy business, which still represents about 35% of annual operating profit; Hasbro’s board chose the internal head of the company’s gaming business, Chris Cocks, as the new CEO, which we think sends a strong message.”
Hasbro shares are down 2.5% over the past year. Walt Disney Co. (NYS:DIS) stock has fallen 16% over the last 12 months. And the benchmark Dow Jones Industrial Average (DOW:DJIA) is up 14.3%.