Tuesday Earnings Report Preview: Consumer and Toy Stocks HBI, MAT & JAKK

On Monday, June retail sales data will be released ahead of earnings reports from consumer stock Hanesbrands (NYSE: HBI) and toy stocks Mattel, Inc. (NASDAQ: MAT) and JAKKS Pacific (NASDAQ: JAKK) on Tuesday. And while there is optimism that June retail sales increased thanks to higher vehicle purchases as Americans replace aging cars, the rest of the retail sales data may not be so rosy. That could hit stocks like Hanesbrands (HBI), Mattel, Inc. (MAT) and JAKKS Pacific (JAKK) with some headwinds going into their earnings reports. Other than that, do these three consumer or toy stocks offer anything for traders for the short-term or investors for the long-haul? Here is a quick look at what you should be watching out for:

Hanesbrands (NYSE: HBI): Positioning Itself for the Future

Hanesbrands is a global consumer goods company with a portfolio of leading apparel essentials that include T-shirts, bras, panties, men’s underwear, kids' underwear, socks, hosiery, casualwear and activewear. Hanesbrands will report earnings on Tuesday with no time supplied and its worth noting that back in June, the company announced it will redeem $150 million worth of outstanding debt in July to help pay off $300 million worth of floating-rate bonds this year plus pay off $500 million worth of notes fixed at 8% interest in 2013. At that point, Hanesbrands’ bond debt would be reduced to about $1 billion. Moreover and back in May, Hanesbrands announced plans to exit its US unbranded apparel business, sell its Outer Banks sportswear label and sell its European wholesale casualwear division to an affiliate of Dutch consumer goods company Smartwares B.V. for around $18.80 million. Naturally such restructuring will hit Hanesbrands’ bottom line in the short-term plus last quarter the company reported a quarterly loss for the first time in two years. However and with cotton prices down along with the above mentioned initiatives, its worth paying attention to Hanesbrands’ earnings report and keeping an eye on the stock as it focuses on higher margin and higher priced brands. On Friday, Hanesbrands rose 2.48% to $29.71 (HBI has a 52 week trading range of $21.74 to $33.36 a share) for a market cap of $2.90 billion plus the stock is up 35.91% since the start of the year, down 6.3% over the past year and up 12.4% over the past five years.

Mattel, Inc. (NASDAQ: MAT): Watch For Worldwide Sales Figures for Key Brands

Mattel, Inc. has a portfolio of well known toy brands and products that include Barbie fashion dolls and accessories (Barbie), Hot Wheels, Matchbox, Tyco R/C vehicles and play sets and Fisher-Price Brands. Mattel, Inc. is set to report earnings before the market opens on Tuesday and investors should listen carefully as last quarter, the company reported that Fisher-Price Brands worldwide sales were flat, Hot Wheels sales fell 5%, Barbie’s sales fell 6% and the whole Entertainment business fell 17%. However, the American Girl line grew 4% while the Other Girls Brand segment grew 22% with net sales falling 2% from $951.9 million to $928.4 million. Its worth noting that Mattel, Inc. has a strong balance sheet and ongoing cost containment initiatives but its also worth considering that the company’s classic toy brand (which you or I probably played with when we were kids) are also competing with the iPad and other digital devices (that we did not have when we were kids). Hence, Mattel, Inc.’s profit also sank 52.9% from $16.6 million to $7.8 million when it last reported earnings and analysts expect another 8.7% decline this time around. On Friday, Mattel, Inc. rose 0.45% to $31.23 (MAT has a 52 week trading range of $22.70 to $34.62 a share) for a market cap of $10.64 billion plus the stock is up 12.5% since the start of the year, up 14.4% over the past year and up 74% over the past five years. Mattel, Inc. also pays a forward dividend of $1.24 for a dividend yield of 4% – something investors can play with.

JAKKS Pacific (NASDAQ: JAKK) Offers Investors a Few Caveats

JAKKS Pacific has become a top five US player in the toys and leisure products who products include Action Figures, Electronics, Dolls, Dress-Up, Role Play, Halloween Costumes, Kids Furniture, Vehicles, Plush, Art Activity Kits, Seasonal Products, Infant/Pre-School, Construction Toys, Ride-On Vehicles, Wagons, Inflatable Environments and Tents and Pet Toys. JAKKS Pacific will report earnings before the market opens on Tuesday and its worth noting that the last time it reported earnings, revenue rose 1.5% year over year to $73.4 million while gross margin fell 150 basis points to 32.1%. Moreover, JAKKS Pacific reported an adjusted loss of 65, higher than the 61 cents to 64 cents guidance given by management due to higher operating expenses from the recent acquisition of Moose Mountain plus marketing expenses from the launch of the Monsuno product line. However, JAKKS Pacific has anticipated a better retail environment for 2012 but investors should also be wary as consumer confidence falls plus most of the company’s products are made in China – meaning wage inflation and exchange rates are concerns. Moreover and unlike Mattel, Inc. with its tried and true brands (that also experienced sales declines the last reporting quarter),JAKKS Pacific is more dependent on new brands and licensed products. On Friday, JAKKS Pacific fell 0.19% to $15.85 (JAKK has a 52 week trading range of $13.29 to $20.37 a share) for a market cap of $412.40 million plus the stock is up 12.4% since the start of the year, down 11.6% over the past year and down 48.3% over the past five years. JAKKS Pacific also has a forward dividend of $0.40 for a dividend yield of 2.5%.

The Bottom Line. Consumer stock Hanesbrands (HBI) has plenty for investors to be optimistic about for the long-term, but one should be more cautious about toy stocks Mattel, Inc. (MAT) and JAKKS Pacific (JAKK) and wait to see what’s in their earnings reports.