Hasbro, Mattel shares tick lower amid shipping crisis impacting toys

on Jun 18, 2021
  • The NY Post says shipping containers aren't available to bring manufactured toys from China to the U.S.
  • The shortage could badly hurt the U.S. toymakers in the holiday season if the situation doesn't improve.
  • Toy companies like Hasbro and Mattel were under pressure in the stock market on Friday morning.

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Toymakers Hasbro Inc (NASDAQ: HAS) and Mattel Inc (NASDAQ: MAT) were under pressure in the stock market on Friday morning as the New York Post said that thousands of boxed, ready-to-be-delivered toys from Tonka trucks to puzzles, and action figures to dolls are stranded in China as shipping containers aren’t available to bring them to the United States.

Hasbro raised toy prices citing higher transportation costs

The global transportation pipeline took a massive hit last year due to the Coronavirus pandemic. The Suez Canal obstruction earlier in March 2021 further worsened the situation. Consequently, the shipping containers are now either scarce or priced twice as much as before the pandemic. Hasbro had raised toy prices in April, citing higher transportation costs.

Compared to the price at which Hasbro closed the regular session on Thursday, the stock is currently down more than 1%. It is exchanging hands at $90.76 per share (£65.67 per share) versus its year-to-date high of $100 per share in mid-April. Hasbro had tanked to a low of $46 per share in March 2020.

If the situation doesn’t improve in the upcoming weeks, it could raise the alarm for the U.S. toymakers, which conventionally generate the most sales during the holiday season.

“We’re not seeing any panic yet about the flow of holiday goods. If we see persistent constraints into late-summer, then we will start to worry a bit more,” said Jefferies analyst Stephanie Wissink.

Shipping challenges are not new for the toy industry

The toy industry is currently facing a delay of roughly three weeks. Shipping challenges, however, are not new for the industry, as per analyst Linda Bolton Weiser of D.A. Davidson. Recalling the Port of Los Angeles’ workers strike several years ago, Weiser said:

“Toy stocks tanked, but Christmas went off without a hitch. Toy companies were able to get their toys loaded on the tops of freighters and unloaded the fastest.”

On the other hand, Basic Fun CEO Jay Foreman warns that pressure from manufacturers in China is mounting, and they are now leaning towards not taking new orders until the U.S. retailers source containers. Freight charges, as per Mattel, have had a material impact on its margins already.

Mattel shares are also more than 1% down this morning compared to the closing price on Thursday. On a year-to-date basis, the stock is still up more than 10%. Mattel has recovered to $19.20 per share from $7.42 per share in March 2020.