SOURCE: Rothman Research

Rothman Research

April 19, 2010 08:26 ET

Toys Sales Indication of Growing Consumer Spending

JOHANNESBURG, SOUTH AFRICA--(Marketwire - April 19, 2010) -   - - So far the earnings season has indicated that the economic recovery is making great strides in the 1Q of 2010 as consumer spending begins an uptrend as compared to the same time period last year. One sector that is can be a clear indication of consumer spending trend is the consumer goods sector. Last Friday, Mattel Inc. (NASDAQ: MAT), the number one U.S. toy maker, made a stellar first quarter announcement with a profit of $24.8 million and revenue of $880.1 million, pulverizing meager analyst projection of a $0.03 loss per share on revenue of $860 million. Sturdy sales for brand toys based on kiddies' TV shows were cited as the core catalyst behind Mattel's impressive quarter reading. A year ago, Mattel reported a loss of 14 cents per share, but it would seem that this year the company financials were saved by the most unlikely marketers - a team of lifeless toys from the Barbie, Toy Story, WWE, Hot Wheels and other core games that have caught the hearts and minds of a generation of children.

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"Mattel's first quarter report is not only a great sign of the company's quarterly performance but it's also a good indication of where economy is heading. If you remember in 2009, inventories in the toy industry segment had been a major cause of concern due to a sharp decline in consumer spending, but 2010 first quarter seems to be out for revenge, as retailers are already replacing what they sold," commented Jack Benassi of, "if consumers are willing to spend on nonessentials like toys, this could mean that their faith in the economic recovery is slowly, but surely growing. But as the saying goes one is not a pattern. What could set a pattern is today's earnings release from Hasbro Inc. (NYSE: HAS), U.S.A's second biggest toy manufacturer. I believe that we could see positive results from Hasbro based on the fact that some of its brand toy like transformers and G.I. Joe are all time favorites of kids around the world."

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The toy and gaming industry is a $60 billion market and has been on an expansion path in recent years, even if the 2008-2009 recession slowed its growth of late. A few reasons driving its growth rate are the surging demand for video games and recent releases of blockbuster Hollywood movies based on franchised brands like Transformers and G.I. Joe. And if there is one thing the toy industry would never be in shortage of, it is the number of kids worldwide. 2010 earnings release is already looking like the toy industry players have some nicely wrapped gifts under their Christmas trees, with the only difference that we are still in April.

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