(#12) Toys Industry: analysis and financials
Costin Ciora, PhD.
CEE Advisor to Simon-Kucher | Financial Analysis Assistant Professor at ASE | Financial Analysis, Strategy, Pricing Expert | Author
by Vladi & Celia and Costin Ciora
Hello,
This analysis is the most special for me so far.
Some short backstory:
It started from Vladimir, my 7 years old son who saw me gathering information for the next analysis. Vladi said he wants to write an analysis as well, while he was playing with some Lego. He's a fan of Lego, Hot Wheels & Monopoly. So, guess what? Lego, Mattel (Hot Wheels creator) and Hasbro (Monopoly creator) are the largest toys companies in the world. So, my son became my co-author & help for this project. We play together with these toys, but he started giving me some insights of some Hot Wheels models he saw in their cartoons, or some new lego models he saw in a catalogue. He his my Subject Matter Expert on this topic. But, then my 10 years old niece Celia wanted to help and learn more about the numbers. So, they joined into adding some colours to the graphs but also getting curious about the numbers and the companies.
Hope you will appreciate also some graphs which they drew based on the numbers I found and then I scanned them. It was nice to see my son going to my wife and ask "Did you know how much Lego had as revenues last year?" and my niece Celia telling her parents about Hasbro's revenue decrease in 2023.
So, we found so many numbers related to the story of some of the toys I'm playing with Vladi & Celia. Hot wheels? 1,4 bn $ in revenues in 2023. And much more. I hope you will enjoy reading this article as we did, researching, playing, drawing & playing with Excel along the way.
The analysis has some industry outlook but also the 3 companies analysis with some insights on their strategy.
The purpose of this newsletter is to connect the story with the numbers, or sometimes the numbers with the actual story. It is, of course, my own view on the topics without any investment recommendation. I hope we can start conversations around the points below.
First the market:
The largest exporter of toys, games & sports was China in 2021-2022 with an export value growth of 4,11 bn $ while the highest importer was United States with 1,58 bn $ growth in import value. The total export value was 47,6 bn $ which represents 69,8% of total export of toys globally.
The map below shows the net exporter versus net importers.
Toys Association estimated for 2022 a total market size of 107,4 bn $ while Statista estimated for 2024 a growth to 130 bn $ with US having 40,1 bn $ of the total.
It is estimated that the future compound annual growth rate will be 2,49% until 2028.
When it comes to toys, especially dolls & stiffed toys China has 12,4 bn $ in revenue (estimated for 2023) and a potential growth rate of 6,9%.
?The smart toys revenue were 8,38 billion $ in 2020, with estimation for growth in the coming years.
Brand Finance estimated the most valuable toy brands in 2023 as seen below. We can observe Lego as being the first, while Mattel's Fisher price is 3rd.
In the Europe, the "the toy industry employs about 51,000 workers for a production value of about €5.8 billion. 99% of EU toy manufacturing companies are SMEs. They account for 61% of EU toy industry employment. The EU is second global toys exporter with a share with 4.6%. The EU exports toys worth about €50 million to China (up from €25 million five years earlier) and about €280 million to the USA. The toy trade between EU countries is worth about €4.2 billion." Check more here: https://single-market-economy.ec.europa.eu/sectors/toys_en#:~:text=The%20EU%20toy%20industry%20employs,than%2086%25%20of%20world%20exports .
Below, I analysed 3 companies: Lego, Mattel & Hasbro - with some help from Vladi & Celia.
The companies:
Lego analysis
Lego's Revenue increased in the last 5 years with 71% to 65,91 bn danish kroner or 8,84 bn Euro. The company (as represented below) had a strong growth in the last 20 years.
Lego has the highest mix of revenues in Americas (46,47%), where it also had the highest growth as represented below.
When it comes to profitability, Lego has stable values for Gross Profit Margin (68-69%), Operating Profit Margin and Net Profit Margin (25,9% in 2023). It signals the ability of the company to make use of costs in order to have high profitability.
The Expenses ratios (calculated in relation to 1000 $ of revenues) increased in the last years, most likely because of higher production costs and reduced possibility to increase prices for the sets. The Operating Expenses for 1000 $ of revenues increased in 2023 to 740 (from 723 in 2022).
?According to Wargamer.com these are the most expensive Lego sets ever made:
Mattel analysis
Mattel revenues increased with 0,8% to 6,1 bn $ in 2023. Dolls segment (including Barbie) have 39% of the total, while Hot Wheels have 24% of the total with 1,43 bn $ in sales. Barbie's sales increased from 1,49 bn $ in 2022 to 1,54 bn $ in 2023.
Mattel's top 3 power brand are Barbie, How Wheels & Fisher Price with 3,82 bn $ or 62,6% of the total revenues.
The success of Mattel can be seen also in the drawing below :). The division increased from 800 bn $ in 2016 to 1,43 bn $ in 2023. For sure, I contributed :) as my son's collection is very high.
Some Hot Wheels facts from https://www.hotwheelsmedia.com/hotwheels-fast-facts/ . Check the link for more.
Barbie's sales increased in 2023 and it will be interesting to check also the sales fro 2024 in order to see the impact of the movie on the actual dolls sales.
I found also the most expensive Barbie dolls ever sold. Stefani Canturi was sold in 2010 with 302500 $.
Barbie is a power brand, actually the most important for Mattel. When the company increased in revenue was because of the increase in this brand. Of course, Hot Wheels is also a power brand so we will see how it will evolve over time.
Mattel's Profitability was stable when it comes to Gross Profit Margin (47-48%), but decreasing in Operating terms. The Operating Profit Margin decreased from 13,4% in 2021 to 10,3% in 2023. The Net Profit Margin was even more lower, decreasing from 16,5% in 2021 to 3,9% in 2023.
The advertising & promotion as Expenses % in revenues also decreased from 10% to 9,6%.
The expenses indicator remained stable (between 866 to 897).
Hasbro analysis
?The company's revenue decreased from a peak of 6,42 bn $ in 2021 to 5 bn $ in 2023. Moreover, the company's profitability also decreased in Gross Profit, Operating & Net Profit terms. The company registered a net loss in 2023 of 1,48 bn $.
?In 2023, the company had higher level of advertising & promotion expenses as % of revenue of 7,2%, but this indicator was actually affected by the fact that the revenue decreased in 2023 compared with 2021 with 22% while the expenses for advertising decreased with 29%.
In 2023 the Operating Expenses for 1000$ of revenues was 1307,6 $ for each 1000 $, which signals challenges for the company in operating terms.
We cannot exclude from the conversation Walt Disney Company and the Consumer Products segment which has high profitability as seen in this graphic from Statista.
Things to watch:
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Before we go, check this Wall Street Journal video on The Economics of Lego.
Thanks for reading and take care,
Vladi & Celia and Costin Ciora, PhD
P.S. In the next edition, my focus will be on the Gaming sector, so don't forget to subscribe for the next one. Also, if you like this one, please share & comment with your thoughts.
References & interesting resources:
By far the most good to read article! Congrats'!
Business Strategy and Marketing Expert, PhD – Venture Capital in Saudi Arabia
6 个月Loved this piece, Costin! ?? It's fantastic how you’ve mixed professional insights with a personal touch through your son Vladi and niece Celia's involvement. They really bring the data to life with their colorful drawings, making the analytics fun and relatable! Your insights on the toy industry giants—Lego, Mattel, and Hasbro—are clear and super engaging. It’s great how you make complex information so accessible and enjoyable with fun facts and a family-friendly approach. ?? Can’t wait for your next edition on the gaming sector! Keep these wonderful stories coming; they’re a true joy to read and bring a fresh perspective to finance and strategy. Awesome job! ??