By Mark Seavy 

As U.S. import tariffs take hold, toy companies are bracing for higher prices, more inventory, and a later start to merchandise resets at retail for the holiday season, toy industry executives said. 

That much was clear when Mattel, Hasbro, and Jakks Pacific released Q2 earnings last week and reduced sales forecasts for the year. 

While final U.S. reciprocal tariffs on imported goods are scheduled to take hold August 1, the toy companies are basing their projections on those for China (30%) and Vietnam (20%), which are two of the industry’s major manufacturing hubs. 

Hasbro, for example, sources about 50% of its products from China and is forecasting that its consumer products revenue, which includes licenses with Disney, World Wrestling Entertainment, and others, will fall 5-8% this year versus an earlier estimate for a 4-6% decline, CFO Gina Goetter said.  

Mattel, meanwhile, is projecting a 1-3% boost in sales in the second half of the year against an earlier forecast for a 2-3% increase. In consumer products, Mattel projected a 19-20% decline in Q2 sales but finished with a 16% decrease. Jakks didn’t provide a year-end forecast after recording a 20% decline in Q2 revenue, including a 30.9% decrease ($86.9 million) in the U.S. 

As companies navigate reduced revenue, wholesale prices are being increased across several product categories. The exact amount isn’t clear, but analysts project that, in the case of Jakks, where the bulk of products sell for less than $30 based on a $15 wholesale price, the tariffs may boost retails at the high end to around $35. In products where the prices have increased there has been a “meaningful reduction in units sold” and “only a handful” kept their “unit productivity despite higher retails,” Jakks CEO Stephen Berman said. 

Mattel and Hasbro are also imposing “selective” price increases. But Mattel isn’t planning additional price increases for the remaining balance of the year, CFO Paul Ruh said. 

“There are going to be substantive price increases, but the companies are still negotiating that right now,” said Eric Beder, CEO at Small Cap Consumer Research. “But there is no doubt prices are going to go up and it has already happened and is just going to continue. You can’t really change the toy production from China in the near term and, given the tariffs we are seeing on Vietnam and other places, I am not sure it makes monetary sense to shift production.” 

At the same time, retailers have delayed their fall/holiday merchandise resets until late September (compared to a more typical July-August timeline). They have also required suppliers to hold more inventory, rather than the free-on-board (FOB) or direct shipping that has been customary in the past. At Jakks, for example, 70% of its products are typically delivered FOB against an industry average of under 50%.  

This inventory shift was underscored by Mattel ending Q2 on June 30 with $867.9 million in inventory, up from $776.9 million a year earlier, while Hasbro was at $417.1 million versus $357.6 million. Jakks’ Q2 inventory rose to $71.8 million from $51.3 million.  

“You are going to see a lot of companies and retailers cautious on inventory and consumers are going to have a bit of choice because they are still very promotionally sensitive right now,” Hasbro CEO Chris Cocks said. “A lot of hot products are going to be out of stock this holiday because we may not be resupplying because we don’t have upfront inventory.” 

To lessen the impact of tariff costs—Mattel is projecting $100 million for the year against an earlier forecast for $275 million—the companies are shifting some product from the U.S. market to international regions.  

Jakks, for example, reported a 40% increase in Q2 international sales to $32.1 million, while Mattel posted a 7% increase at $507.8 million. Hasbro, meanwhile, took a $1-billion noncash goodwill impairment charge tied to a “rationalization” of SKUs, some of which turned unprofitable due to the tariffs, said Goetter. Hasbro is also sending more products to international markets, she said. 

In some cases, “the products couldn’t survive huge [price] increases because they would have been moved to a price point that wasn’t palatable for the consumer,” Goetter said.