Mattel Inc. and Hasbro Inc., the two biggest toy makers in the U.S., warned Tuesday that first-quarter sales will be below expectations due to a dip in orders from Toys R Us Inc., their largest customer.
El Segundo-based Mattel said it expects sales to be relatively flat, compared with the same period a year ago. Hasbro warned sales will fall 15%.
The shortfalls come as Toys R Us reduces its inventory selection to make room for better-selling merchandise. The chain is the industry leader in toy sales but faces tough competition from Wal-Mart Stores Inc., the second-biggest toy seller. Toys R Us warned in February that fiscal fourth-quarter earnings would be hurt by lower-priced toys offered by discounters.
Hasbro, the nation's No. 2 toy company, said its first-quarter earnings may fall as low as 5 cents a share, from 20 cents a year ago. The company, based in Pawtucket, R.I., said the impact of Toys R Us inventory changes will continue into the second quarter, but said it expects second-half earnings to make up for the shortfall in the first half.
"We have consistently stated that we expect difficult comparisons in the first half of 1998, which is proving to be the case and has been compounded by the actions of Toys R Us," said Chairman and Chief Executive Alan Hassenfeld in a statement.
Mattel, the No. 1 toy maker, said it expects first-quarter earnings to rise from 1 cent a share a year ago. Mattel spokesman Glenn Bozarth declined to say whether the company was comfortable with analysts' estimates of 4 cents a share for the quarter.
Hal Vogel, an analyst at Cowen & Co., said he was reducing his first-quarter estimate for Mattel to 3 cents a share, from 5 cents.
Mattel and Hasbro issued their earnings forecasts after the markets closed. Mattel's shares rose 44 cents to close at $43.44, and Hasbro shares gained $1.13 to $38.38. Both trade on the New York Stock Exchange.