Barbie, G.I. Joe Makers Go to Hollywood

NEW YORK ( TheStreet) -- Forget the year of the rabbit -- 2011 might turn out to be the year of the Potato Head.

This week Hasbro ( HAS), the second-largest toy company in the world, and No. 1 Mattel ( MAT) are expected to post a decline in first-quarter earnings. But Hasbro is gearing up for a busy summer of blockbuster movie tie-ins that could lift profit by 20% this year.

Investors will size up the toy rivals this week, with Hasbro reporting quarterly results on Thursday and Mattel on Friday. The strengthening economy and ancillary businesses such as movie tie-ins and TV programs could bring surprises for investors this year. And these revenue sources may prove especially lucrative for Hasbro, which is best known for its Mr. Potato Head doll, G.I. Joe action figures and iconic board games.

The toy business isn't mere child's play. According to NPD Group, U.S. toy industry sales were $22 billion last year, up 2% from 2009, even as consumer spending waned.

However, toy makers have had to work harder to entice thrifty customers in recent years. While Mattel's sales increased 8% to $5.86 billion in 2010, Hasbro's revenue slipped to $4 billion from $4.07 billion. The prospect of $4-a-gallon gas means kids will likely lose out in the toy department.

Toy makers' shares have yet to show sustained outperformance. Mattel's are up 2.3% this year and 16% over the past 12 months, while Hasbro's are flat this year and up 23% over the past year. The Standard & Poor's 500 Index has risen 5.9% this year and 13% over the past 12 months.

Mattel and Hasbro own many of the world's most beloved toy brands. Pawtucket, R.I.-based Hasbro owns the rights to the Monopoly game, which is in its 76th year, and G.I. Joe, who first fired a shot in 1964, continues to bring in cash. Mattel's "Barbie," who will turn 52 this year and hasn't changed a bit since her launch in 1959, still generates big revenue for the El Segundo, Calif., company.

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