Toys R Us' demise is having a devastating effect on America's largest toy companies

It's a tough time to be in the toy industry.

America's two largest toy makers, Hasbro and Mattel, aren't doing so well in the wake of Toys R Us' bankruptcy.

Hasbro, which makes Monopoly, Play-doh, Nerf guns, Transformers-branded toys, and My Little Pony, said in its third-quarter earnings report on Monday that sales were down 7% in the United States and Canada. It also announced a $50-60 million restructuring plan that could result in hundreds of layoffs.

The layoff will affect a "mid-single digit percentage" of Hasbro's 5,000 estimated employees, a Hasbro spokesperson confirmed to Business Insider.

"

Hasbro and Mattel have had to scramble to find new avenues for selling their toys following the liquidation of Toys R Us earlier this year. Big-box stores like Walmart and Target usually buy toys later in the year than Toys R Us did, which caused a crunch at the end of the third quarter. Hasbro CEO Brian Goldner said in a conference call discussing earnings that the company couldn't meet all of the demand.

Mattel, which sells Barbie, Hot Wheels, Fisher-Price, and American Girl brands, announced in July that it would reduce its global workforce by 2,200 jobs, blaming bad results on lost sales from Toys R Us' closure. At the time, the company said its revenue would have been close to flat if not for the loss of revenue from Toys R Us.

The company announced a sales bump in its third-quarter results on Thursday, attributed to strong Barbie sales. But during an investor call, the company said it expects the impact of Toys R Us' liquidation to have a greater effect on fourth-quater earnings, which are typically the most important for a toymaker.

Toys R Usfiled a motion to liquidateits US business in March, initiating the closing or selling of all 735 of its US stores. They all closed for good at the end of June.

Since then, big-box stores like Walmart and Target have announced new toy-based initiatives for the holiday season, including offering more options to customers and having more inventory in new store space cleared just for toys.

In both cases, the new in-store space is permanent. It likely still won't make up for Toys R Us' billions in yearly toys sales, however.

Toys R Us' demise is having a devastating effect on America's largest toy companies

JOIN OUR PULSE COMMUNITY!