MW New China tariffs may mean higher toy prices, but Mattel and Hasbro are working to blunt the impact

By Ciara Linnane

Mattel and Hasbro may have to raise prices if China tariffs remain in place for longer, but it's not all bad news, UBS says

America's two biggest publicly owned toymakers may be forced to raise prices if President Donald Trump's 20% tariffs on imports from China remain in place, but both companies have mitigation strategies that should blunt the impact.

That's the view of UBS analysts who hosted Barbie maker Mattel Inc. $(MAT)$ and "Magic: The Gathering" parent Hasbro Inc. $(HAS)$ at the firm's consumer conference in New York this week.

Hasbro, which also makes Play-Doh and Transformers action figures, had offered guidance for 2025 that was based on a 10% tariff on goods made in China, which it had said was manageable given its supply-chain flexibility resulting from moves to diversify in recent years.

"Pricing becomes a much bigger lever in case of 20% tariffs on China, and [the second quarter] is when the full impact will flow through, if tariffs were to be maintained," UBS analysts led by Arpine Kocharyan wrote in a note to clients published Friday. "For Hasbro's bigger customers, there is around a 90-day lag in term of price changes."

Between 50% and 60% of Hasbro's shopkeeping units, or SKUs, fall within "psychologically important" price points, although customers age 13 and over account for about 60% of Hasbro's demand, according to the note. Within that group, collectors and fans "are generally less price elastic vs. average toy consumer," the analysts wrote. Price elasticity refers to how sensitive a buyer is to higher prices.

Hasbro has been expanding its manufacturing to countries such as Vietnam and India to reduce its reliance on China, and management said Indonesia may be its next port of call.

Pawtucket, R.I.-based Hasbro currently sources its products from eight countries, with China accounting for 50%, down from 60% previously. The company is aiming to reduce that reliance to 40% by 2026.

By contrast, the overall toy-industry average is for 80% to 85% of revenue to be sourced from China.

Mexico, also now subject to tariffs on certain goods, accounts for 2% of Hasbro's production. The company does not source any products from Canada.

"It typically takes about a year to set up manufacturing, and about 2-3 years to ramp up production," the UBS analysts wrote.

Hasbro told UBS it has tried to lower average price points over the past two years, and having to raise them now would be a setback in its strategy of trying to meet its customer where they are.

About 50% of toy-industry SKUs were priced at or below $20 in 2024.

Still, the company sounded upbeat on the consumer and said it has not seen any material change with its Easter order book and that discussions with retailers are progressing well.

The toy industry has some resilience in an economic downturn, because parents still take their children to birthday parties and buy them holiday gifts. "We estimate impulse purchases (vs. event-driven purchases) make up roughly 10% to 15% of annual industry sales for the category," the UBS analysts said.

Mattel, meanwhile, also struck a confident tone in meetings with UBS analysts, saying tariff uncertainty is challenging operationally but that the company has contingency measures to offset the impact.

Mattel has also been diversifying manufacturing away from China and currently sources products from seven countries. China represents about 40% of that sourcing, down from 50% previously.

Because the U.S. accounts for about half of global toy sales, China tariff exposure is around 20% of global cost of goods sold. That implies a 100-basis-point gross-margin impact for Mattel, or about 12 cents of per-share earnings, based on 10% China tariffs, UBS said.

Mattel said that by 2027, no country will account for more than 25% of its production.

UBS has a buy rating on both stocks. Mattel was slightly higher Friday but has fallen 10% in the last month.

Hasbro was up 0.4% Friday and is down 2% over the last month, while the S&P 500 SPX has fallen 10%.

-Ciara Linnane

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March 14, 2025 11:22 ET (15:22 GMT)

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