Shortly after joining toymaker Hasbro Inc. (HAS) more than a decade ago, Brian Goldner took his 5-year-old daughter Brooke on a tour of headquarters. She wasn’t impressed.
“She put her hands on her hips and said, ‘Dad, the way I see it, you don’t have any toys for girls,’” Goldner, who was promoted to chief executive officer in 2008, said in an interview. Her candor only reinforced what Goldner already knew: Hasbro didn’t understand how girls played and what they wanted.
Much has changed since then. Thanks to improved consumer research and revived brands such as My Little Pony, Hasbro has found success beyond its boy-focused Transformers and Star Wars toys while making inroads on Mattel Inc. (MAT), which is considered the dominant girls-toy maker because of its Barbie and American Girl dolls.
Hasbro last week said revenue from the girls division rose 26 percent in 2013, topping $1 billion for the first time and more than tripling its $300 million in 2003 sales. That helped make up for a 22 percent decline in sales from the boys unit last year. Companywide sales were little changed at $4.08 billion.
“The girls business is the strongest part of the company, and 10 years ago they were not really considered a player,” Sean McGowan, an analyst at Needham & Co. in New York, said in an interview. He recommends buying the shares.
The girls unit may ease volatility in Hasbro’s results because boys sales rely more on tie-ins to studio films that can vary in number and quality each year, McGowan said. That’s partly why boys sales fell in 2013, he said. Girls also may help Hasbro as the toy industry, especially in the U.S., fights to win kids’ attention in an era of mobile devices. U.S. toy sales fell 1 percent last year, according to researcher NPD Group.
Hasbro’s turnaround with girls started with the My Little Pony line. The brand, backed by a popular animated series, had been an important part of the company’s success in the 1980s. By the late 1990s, My Little Pony languished and Hasbro eventually shelved it.
The toymaker reintroduced My Little Pony in 2003, and after its research and testing showed friendship and working together were central to girls’ play, it focused its television show on those themes. Sales for the line have tripled in the past three years, Hasbro has said, without providing a precise revenue figure.
The company again rebooted a dormant brand in 2012, when it brought back Furby, the computerized talking creature, after an absence of more than a decade. Last year, Furby surpassed My Little Pony as Hasbro’s top-selling girls brand.
Furby and My Little Pony both are following a playbook Hasbro established with the Transformers line. Seeking to rely less on licensed brands that require it to pay royalties to other owners, Hasbro brought back the homegrown Transformers line and worked to expand it through a new show and feature-length films.
The recent successes have helped Hasbro’s shares, with the stock rising 31 percent in the past 12 months. That compares with a 13 percent decline for Mattel, which saw revenue from Barbie, its largest brand, fall 6 percent last year for the second straight annual decline. Hasbro, which gained 0.2 percent to $53.05 at 10:01 a.m. in New York, is the third-largest toymaker by revenue, with Mattel as the biggest, followed by Lego A/S.
Goldner said new girls lines such as Nerf Rebelle show how Hasbro understands what it once didn’t. At first glance, Rebelle, with its pastel plastic archery sets, looks like an attempt to take Nerf, one of its biggest boys brands, and feed off the success of “The Hunger Games” books and movies, which feature a female protagonist.
Not so, Goldner said.
“There are more girls playing organized and individual sports than ever before,” said Goldner, who added that Hasbro spent two years creating and introducing Nerf Rebelle. We want to give girls “the opportunity to express themselves and play together in a more high-action way, and that’s what the brand is all about.”
Hasbro recently unveiled several new girls toys that are the first to incorporate research from a global consumer study done in several countries during 2012. The data helped Hasbro delve deeper into what Goldner calls the psychographics of children.
Toys traditionally are aimed at age ranges, and now Hasbro also is considering the different kinds of personalities within a group, Goldner said. For example, some girls want a finished doll to build stories around while others want to create their own. So a recent release within the My Little Pony brand is Pony POP, featuring customizable ponies.
“This appeals to little girls who are more of what we call the makers,” Goldner said. “These are girls that want their own creative expression.”
The approach will help Hasbro expand properties into more spinoff brands and categories, Goldner said.
“They were treating girls toys before as a product with a life cycle or as an item,” McGowan said. “Now they are really thinking about brands as a category that can be extended for several years.”
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