Uncertainties Send Toy Stocks Sliding
Shares of top toy maker Mattel Inc. and rival Hasbro Inc. fell to their lowest levels in at least 14 months Monday after a downgrade by Lehman Bros., which cited deteriorating industry conditions.
Analyst Felicia Kantor Hendrix cut Mattel’s rating to underweight from overweight and Hasbro to underweight from equal weight, citing “eroding industry fundamentals.”
Referring to the companies’ popular toys, Hendrix said in a research note that “any strides Hasbro is making in the market place with My Little Pony, Transformers and potentially VideoNow Color, and that El Segundo-based Mattel is making with its new Barbie strategy, will be irrelevant until there is more clarity on the Toys R Us situation.”
Last week, Toys R Us Inc. said it might sell its toy store business, the world’s second largest, in the face of competition from discounters such as Wal-Mart Stores Inc. and Target Corp. The company is considering whether to build up or spin off its profitable Babies R Us retail franchise, which sells furniture and clothing.
Mattel shares slid more than 5% to $16.32, the lowest point in nearly two years, before rebounding to end down 23 cents at $16.96 on the New York Stock Exchange.
Hasbro, based in Pawtucket, R.I., fell to $16.99 in early NYSE trading Monday, a level last seen in June 2003, before paring losses to 3 cents to close at $17.60.
Lehman did not mention Emeryville, Calif.-based LeapFrog Enterprises Inc. in its report, but the educational toy maker’s shares fell to a nearly two-year low of $16.16 on the NYSE. They were off 48 cents for the day, closing at $16.90.
