It would be better for Santa to start working right away to get toys under the tree for the holidays.
UBS analysts have raised concerns that supply chain issues driven by COVID-19 could affect the toy category during critical holidays.
“Currently, the risk is increasing due to supply disruptions, which could strain toy stocks in the months leading up to the holiday season,” analysts led by Arpine Kocharyan wrote.
“Channel stocks are relatively clean, driven by overall healthy demand and deteriorating supply constraints.”
The demand for toys increased in 2020 as parents looked for ways to entertain children coming home.
recently experienced downtime at Vietnam’s manufacturing facilities as a pandemic broke through cities in the region.
In addition, there is a calendar that usually guides you to moving inventory during the holiday shopping season.
“We may start seeing bids in September / October before the holidays,” analysts said. “Toy manufacturers with strong direct import programs with merchants such as Walmart, Target and also Amazon are in a relatively better position to navigate supply chain disruptions.”
UBS notes that Amazon.com Inc.
There was a Prime Day shopping event last month, was muted for the sale of toys.
In addition to supply chain challenges, UBS highlights other short-term issues, such as the incentive money that encouraged purchases earlier this year, largely spent, and if consumers spend these days, they are more likely to experience things like eating out and traveling.
MKM Partners is also concerned about the supply of toys.
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“The supply chain is becoming more worrying due to strong imbalances in containers and still rising shipping costs,” wrote Eric Handler Hasbro Inc.
note earlier this month. He said the same thing at Mattel Inc.
note as well.
Hasbro is expected to report its second-quarter earnings report on July 26, and Mattel is expected to release the results the next day.
“According to press reports, these disturbances will continue in late summer, at the peak of demand, which could lead to stock shortages during the holidays.”
MKM values Habro shares with a price target of $ 115. Mattel’s estimate is neutral with a fair value estimate of $ 23.
Stifel evaluates Hasbro’s share purchase at a target price of $ 114, citing eOne’s improved performance and strength in digital games.
Stifel values keeping Mattel with a $ 23 price target.
“We forecast another solid quarter for bizs with healthy top and bottom line profits, albeit for a seasonally less important period for toys,” the note said.
“That being said, 2H21 is compact tough, which indicates a slowing growth trajectory, and constant supply chain disruptions create general noise (and, in our view, potential risk) that could keep stocks under control.”
Hasbro’s stock has added 0.5% this year, while Mattel has risen 12% over the period.
S&P 500 index
is 15.1% by 2021.