The nation's two top toymakers reported declining sales for the third quarter of 2004 and predicted a challenging retail environment for the coming holiday season.  Mattel, the country's biggest toymaker, reported a 5% drop in earnings and a 2% sales decline in the third quarter and CEO Robert Eckert complained: 'We are currently dealing with broad consumer uncertainty related to higher gasoline prices and a lackluster employment picture, which translates into uninspiring consumer confidence levels.' 

Hasbro's third quarter statement showed higher earnings (because of an accounting change in 2003), but lower sales for its domestic toy and game segments.  Hasbro President and CEO Alfred J. Verrecchia warned: 'Given our top line performance year-to-date and the uncertain retail environment, it is increasingly unlikely that we will achieve our goal of revenue growth for 2004.'

Although both CEOs were using macroeconomic trends to excuse their company's performance, a substantial part of the problem may lie in the decline of some key flagship brands.  For Mattel worldwide sales of Barbie merchandise dropped a substantial 13% and sales of Hot Wheels and Matchbox toys were off 3% as well. The lone bright spot for Mattel (other than its Fisher Price and American Girl brands) was the Entertainment category, which showed an increase of 13% for the quarter.  That category includes Mattel's Batman, JLA, and Megaman action figures.  A spokesman for Decipher told ICv2 that two of Mattel's Megaman figures ranked #2 and #5 in a recent mass merchant survey.

For Hasbro the big problem could be Beyblade, the high tech top whose worldwide decline in sales has also affected Takara, the Japanese company that developed the toy and licensed it to Hasbro (see 'Takara Expects Loss for 2004').  Hasbro's domestic sales of Beyblade toys declined by $30.4 million versus Q3 2003, and international sales of the tops dropped by $34.9 million. 

Hasbro's revenues from its games division (which includes Wizards of the Coast) declined by 5% in part due to the fact that the company had one fewer Magic: The Gathering release in Q3 2004 than it did in the same period a year earlier.  Hasbro once again indicated that its Duel Masters CCG was performing well, though the game, which debuted this year, has not yet become the sort of phenomenon that could make up for declines in other segments.