Results for Toy Makers Mattel, Hasbro Show Market Woes

A tale of two toy companies could send a warning sign for the broader U.S. economy.

Hasbro and Mattel earnings diverged sharply, reflecting a broader division between American consumers.

Hasbro said this week that shoppers were willing to swallow higher prices, meaning it could pass on an effective 24% tariff cost to consumers, Adam Clark reported for Barron’s Daily.

It was a very different story for Mattel.

The maker of Barbie dolls and Hot Wheels cars raised prices last summer in response to tariffs but now looks to be paying the price with cost-sensitive customers, as it was forced to offer discounts over the holiday period.

The split between the two companies points to a so-called K-shaped economy—named that way because the upper arm rises while the lower arm droops. Higher-income households are fine as their wealth builds with a buoyant stock market, while lower-income consumers struggle.

There is a danger of reading too much into one quarter’s worth of earnings from two companies—Mattel is suffering from some specific issues, such as a slow move into digital content.

But weak retail sales in December and rising consumer debt and delinquency rates also suggest lower-income households are feeling the pinch.

The growing divide creates a dilemma for the Federal Reserve, which has to set interest rates for the economy overall.

Weak data suggest a case for rate cuts, but wealthier consumers drive the majority of spending and apparently aren’t feeling constrained—meaning lower borrowing costs could overheat the economy.