Hasbro Toys’ new strategy — preparing kids for college with their new game, Deer Pong.

Toymakers are having their biggest quarter in a decade. In the past week, two of the largest toy makers, Mattel and Hasbro, reported quarterly earnings that exceeded analysts’ expectations. Their stocks however, were met with different results:

• Mattel’s stock increased over 13.6% after releasing earnings while Hasbro’s stock fell nearly 10%.

Barbie’s big year

Mattel, creator of the Barbie and Hot Wheels, saw its sales increase 10% in the third quarter — the biggest increase Mattel has seen in a decade.

• Barbie sales were up 50% in stores due to the Sept. release of the new “Barbie Princess” movie on Netflix.
• E-commerce sales jumped 50% and made up a large portion of Mattel’s growth.

Hasbro, maker of Monopoly, Magic the Gathering and Nerf, was left in the shadow of Mattel. Hasbro’s sales fell 4% in the third quarter — less than expected. Despite beating expectations, its stock fell over 10%.

Investors were likely worried about the impact of COVID on the sales of Hasbro, who relies heavily on toys made for movie studios like Disney — COVID delayed the release of several movie releases.

(See also: Movie theaters are being left for dead)

Toy execs. should have paid closer attention to this stat…

Santa’s got a manufacturing problem… Kids don’t want traditional toys anymore. According to a 2017 study by Common Sense Media, kids are spending an average of 49 minutes a day in front of a smartphone or tablet, a 10x increase from 2011.

Toy makers had been struggling for years before COVID. In 2018, Mattel and Hasbro lost one of their biggest sales channels — after Toys “R” Us, who made up 14% of toy sales in the US, filed for bankruptcy. Toy makers struggled to replace the missing sales and problems continued to pile on….

• Wrong market… According to industry experts, Both Mattel and Hasbro did not put enough focus on fast-growing markets — Asia, Latin America, and the Middle East.
• New toys, new prices… Consumers began purchasing more STEM/educational toys and lower priced toys were entering the market.

For investors… Don’t buy your kids Deer Pong

Don’t take the short-term sales boost from COVID as a reversal in the long term trend. Sales have declined steadily for toy makers over the past 5 years and the time kids spend on digital products will likely grow over time. Looking to bet on the growing digital kids gaming market? Check out Roblox, an online gaming platform for kids, that’s seeking an IPO in early 2021.