Different Fates for Two Major Toy Companies: Mattel's Profits Plunge While Hasbro's Digital Transformation Shows Results

Mattel and Hasbro both released disappointing outlooks for 2026. However, Hasbro’s stock surged as much as 9% on Tuesday, buoyed by strong performance in its digital gaming division, while Mattel’s stock plummeted 30% in pre-market trading on Wednesday, potentially marking its biggest intraday loss in over forty years.

This stark contrast in market reaction highlights the widening strategic gap between the two toy giants.

Although both companies are grappling with sluggish demand for traditional toys, Hasbro’s success in the digital gaming sector has fundamentally changed its risk profile, turning an otherwise bleak outlook into a minor setback. For Mattel, however, the same macroeconomic warnings are enough to send its stock tumbling.

Keegan Cox, an analyst at U.S. investment firm D.A. Davidson, stated: “Mattel is in the early stages of investment, similar to where Hasbro was seven years ago with its entry into gaming.”

As the manufacturer of classic Barbie dolls and Hot Wheels toys, Mattel’s investors are concerned that the company is being dragged down by a weak toy market, and with uncertain retailer orders, the risk of having to reduce inventory is mounting.

Mattel said: “Total billings growth in the U.S. in December was below expectations.” This indicates that new orders from retailers decreased during the crucial holiday shopping season.

Two Development Paths, Both Facing Challenges

Mattel’s revenue mainly comes from toy sales: Hot Wheels cars, Fisher-Price branded infant toy sets, dolls, and action figures licensed from companies like Pixar and Discovery Brothers.

However, consumers are buying fewer classic toys, shifting instead towards board games and digital games related to popular web series and movies.

On Tuesday, Mattel announced plans to acquire the remaining 50% equity in its Chinese joint venture in order to enter the digital gaming market. But these initiatives are still in the early stages and are putting pressure on the company’s profit margins.

In contrast, Hasbro’s Wizards of the Coast and digital gaming division saw revenue skyrocket by 86% in the fourth quarter, with operating margins rising from about 24% in the same period last year to 45%.

Its flagship trading card game Magic: The Gathering saw revenues jump 141%.

Analysts wrote in a report: “Although investors have seen how traditional toy IP can be successfully translated into digital games and the resulting improvement in profit margins, Mattel’s large-scale investment in digital gaming in 2026 will delay the realization of profit growth.”

On Tuesday, Mattel said it plans to invest about $110 million in 2026, mainly in digital gaming, with an additional $40 million allocated to performance-based marketing.

Inventory Backlog Issues Persist

Mattel said during Tuesday’s analyst call that, due to “a shift from direct import delivery to a local fulfillment distribution model,” the company increased discounts to clear inventory backlog, resulting in margin pressure during the quarter.

The company stated that, affected by tariff uncertainties and changing consumer preferences, retailers have altered their ordering patterns.

Now, instead of forecasting demand months in advance and managing long lead times, retailers are making purchases based on actual demand, forcing companies like Mattel to store inventory in their own warehouses.

Analysts say Mattel’s inventory clearance efforts are expected to continue into this quarter, which will further exacerbate the company’s operational difficulties.

Hasbro’s expected P/E ratio is 18.95 times, higher than Mattel’s 12.14 times. In pre-market trading on Wednesday, Mattel’s stock was at $14.6.

Editor: Li Zaofu