Shoppers walk into a Toys ‘R’ Us store in San Antonio, Texas. The company has filed for Chapter 11 bankruptcy protection while continuing with normal business operations. Photo: AP
INTERNATIONAL - When Toys “R” Us filed for bankruptcy last month, it vowed to keep operating stores, boosting investor optimism that the impact on the biggest toymakers this holiday season would be limited.

But with Hasbro’s weaker-than-expected sales forecast and Mattel’s revenue trailing projections - and both companies citing Toys “R” Us as a key reason - the retailer’s struggles are looming large with Christmas less than two months away.

“We did have a real challenge with the timing of that bankruptcy,” Mattel chief executive Margo Georgiadis said. “The whole industry felt the pressure.” Mattel and Hasbro, combined, lost almost $800million (R11.3billion) in market value last week.

Toys “R” Us is their second-largest customer after Wal-Mart Stores. Shares of smaller toy companies Jakks Pacific and Spin Master Corporation also fell. The toy makers significantly reduced shipments in September as Toys “R” Us teetered on the brink of filing. The retailer has said it plans to exit bankruptcy after lessening its heavy debt load.

Mattel’s sales plummeted 22percent in North America, and the company said half of that drop came from fewer shipments to the toy chain and delays on payments.

That knocked the stock down as much as 17percent on Friday, and cast more doubt on its three-year turnaround. Hasbro fared better. Its results actually topped Wall Street expectations, but the company’s sales forecast for the fourth quarter was about half of what analysts projected. Stock tumbled almost 9percent.

Hasbro blamed uncertainty surrounding Toys “R” Us and weakness in key markets like Brazil and the UK. 

- BLOOMBERG