Polls show that the race for president in the United States is pretty much tied. As a result, more businesses and economists are trying to figure out what might happen if former President Donald Trump wins again.
But on Monday, a UBS expert said that Hasbro Inc. and Mattel Inc., two of the biggest toy companies, aren’t as vulnerable to tariffs as some of their competitors.
As a whole, the toy industry is more than 80% exposed to China, but UBS’s Arpine Kocharyan wrote in a research note on Monday that both Mattel and Hasbro are not as exposed to China as the industry average. “Because Hasbro has a bigger gaming business, the company is less vulnerable to tariff risk as a share of its overall profits compared to Mattel.”
On Monday, shares of Hasbro (HAS -1.37%) fell 1.4% and shares of Mattel (MAT-3.36%) fell 3.4% at the end of the day. Mattel and Hasbro both report quarterly results on Wednesday and Thursday. Analysts are hoping for a boost from the holiday shopping season, even though demand for toys isn’t as strong as it used to be.
When Trump was running for president as a Republican, tariffs were a big part of his economic plan. Many of those tariffs have been kept in place or even raised by the Biden government. As Trump tries to get back into the White House, he has suggested putting a 10% tax on goods coming from outside the U.S. and a 60% tariff on goods coming from China.
Trump has said that taxes will help the U.S. get better trade and foreign policy deals, protect U.S. jobs and goods, and bring in more money for the government. But experts have said that these kinds of tariffs make the things that are affected more expensive for consumers and can slow down economic growth. They have also said that other countries might respond with trade policies that hurt the U.S.
Kocharyan said that about 65% of Hasbro’s global goods and about 50% of Mattel’s are made in China. A lot of these products are sent to the U.S. “Every 10% of tariff” could cost Hasbro about $50 million, or 28 to 29 cents in earnings per share. For Mattel, it would cost about $70 million, or 15 to 16 cents per share.
It’s important to remember, though, that toys were part of the “tariff reprieve” in December 2019, she said. “Only a few games that weren’t considered “toys” but were hobby items had to pay tariffs of about 7.5%.”
The National Retail Federation said last week that sales growth for the holiday shopping season this year would be a little slower than usual. This is because the U.S. economy is still recovering from two major storms and many parts of the country are still dealing with their effects. Since two years ago, more people have avoided toys because they are more expensive than other items they want.
Since inflation and election worries are still high, Kocharyan said she didn’t think the outlook for either toy company would change much when they report their results this week.
“Based on the election and the state of the economy as a whole, we don’t expect any meaningful guidance revisions for Mattel or Hasbro at this point,” Kocharyan wrote. “The toy consumer has been holding on.”
