While Toys "R" Us isn't out of the game just yet, the effects of its bankruptcy proceedings are already starting to show themselves.
That includes toy giants like Hasbro and Mattel. Mattel's shares fell 6% to $14.96, while Hasbro shares lowered around 3% to $90.75. If Toys "R" Us does end up liquidating most of it's U.S. operations though, that will have a much more significant impact on every toys company, not just Mattel and Hasbro (via Reuters).
“The worst case scenario is that about 10 percent of the sales of each of the toy companies
Toys "R" Us has already initiated closures of 382 stores (originally 182 and then another 200 were added later), but a less than stellar holiday season has made some uneasy that the company can manage to come out of this without finding a buyer for the complete operation during the bankruptcy process. The company is currently saddled with around $5 billion in debt, and it has found it difficult to find relief.
As for the other toy companies, Hasbro is in a better situation to weather this storm than Mattel at the moment.
“Mattel’s fundamentals and balance sheet are more vulnerable to a liquidation than Hasbro,” said Barclays analysts, who downgraded Mattel’s stock to “Underweight”.
Most everyone expected Toys "R" Us to close a significant amount of stores if it wanted to successfully restructure, something CEO Dave Brandon explained to customers who were worried about the company's future.0comments
"The reinvention of our brands requires that we make tough decisions about our priorities and focus. To that end and following a top-to-bottom assessment of our business, we have decided to close a number of our U.S. stores. We also intend to convert a number of locations into co-branded Toys "R" Us and Babies "R" Us stores. The actions we are taking are necessary to give us the best chance to emerge from our bankruptcy proceedings as a more viable and competitive company that will provide the level of service and experience you should expect from a market leader."
We'll keep you updated on the situation as more news becomes available.