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Friday, January 4, 2008

TOY SAFETY : Is 10% of the company value the right valuation ?

Click to see the graphs

Robert Eckert, CEO of Mattel, must be a reassured man by now... as the Mattel recently got through three massive recalls - and a resulting public relations mess - while it seems that the impact on the stock price is only 10% compared to Hasbro who didn't recall any toy this year.

One factor is that it is almost impossible to avoid Chinese made toys, even if you want to... Customers surveys indicate that people would rather "avoid non-made in China" toys which is virtually impossible to put in practice since the regulation in many countries doesn't make it mandatory to mention the origin of the toys anymore, and simply because -
As the (very bad) book "A year without made in China" tried to demonstrate - living without made in China products is almost mission impossible since only a handfull of toys are not of Chinese origin...

Let's compare with Hasbro, Mattel's major competitor, who recently advertised in newspapers ads that they had had no recall in the past years.

Mattel is down -17% and Hasbro is "only" down -7%
Obviously, the Mattel and other recalls had an impact on Hasbro's stockprice, as customers don't make the difference at first glance to the toys shelves, but the gap is "only" 10%...

Does it mean that the professionnalism and toy safety are worth only 10% of a toys company's value ?

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