Shares of the toy maker, Hasbro (HAS, Financial), have surged 14.3% in the last year. Due to declining interests for traditional toys and growing demand for electronics and gadgets, toy retailers are finding it difficult to attract customers. However, Hasbro has been an exception. Its results have been impressive as customers continue to buy its products, leading to higher sales.
The company reported its fourth quarter results very recently. The numbers were ahead of the Street’s estimates, leading to a sharp increase in its share price.
A look at the numbers
Revenue for the quarter increased 1% to $1.3 billion, over the year-ago quarter. This was slightly below the analysts’ estimate of $1.33 billion. The top line was mainly affected by unfavorable currency movements. Excluding the currency fluctuations, sales surged 7% during the same period. For the full year, revenue climbed 5% to $4.28 billion, over last year. Key drivers for the same included the boys and the girls segment, which performed well during the quarter.
The Boys segment surged 21% to $422 million, as compared to the previous year. Sales in this segment were driven by demand for products such as Transformers, Nerf and Marvel superhero toys. Also, the Entertainment and licensing segment grew 15% and consists of digital gaming and lifestyle licensing.
The Girls segment registered a drop of 10% to $312.4 million, due to decreased revenue from most of the products, partially offset by increased revenue from the sales of My Little Pony and Nerf Rebelle. The Girls segment has been witnessing lower sales in general. Even peer Mattel registered lower sales because of its dependence on Barbie sales.
But the Preschool segment revenue was flat at $146 million and the Games division declined 4% to $510.8 million, as growth in the classics category was offset by losses in the new ones such as Angry Birds.
The operating margin of the company rose 290 basis points to 17.2% and the bottom line jumped to $1.34 per share, up by 31% over the previous year. Even adjusted earnings of $1.22 per share were in line with the analysts’ expectations.
Geographically
Sales in the domestic region grew 1%, whereas in the international market it surged 8%, as compared to the prior year. International revenue was driven by strength in Asia Pacific and in the emerging markets, where it registered a growth of 20%.
Areas of focus
Hasbro has taken initiatives like brand innovation and new product introduction, which would help the company in growing its business further. It also plans to expand into the emerging markets and develop strategic partnerships. These efforts should pay off in the future.
Moreover, Discovery Communications and Hasbro have entered into a deal and have repositioned its network and renamed it to Discovery Family channel. This has been done to attract adult viewership since the children’s TV market has become very competitive. Thus, it will now cater to children during daytime and focus on families in the primetime.
The company will start producing dolls of Disney’s blockbuster film Frozen by 2016, which will help in growing its top line further.
Takeaway
The toy maker’s results this time were affected by a stronger dollar and declining demand for girls' products. Nonetheless, it managed to post a decent quarter and impress the investors as well. It has also increased its dividends by 7% to $0.46 per share and has authorized a new share repurchase program. These factors, along with an attractive Q4, make Hasbro an interesting bet.
