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Sydnee Gatewood
Sydnee Gatewood
Articles (740) 

Hasbro Shares Tumble as Closure of Toys ‘R’ Us Continues to Hurt Profits

Toy company reports 4th-quarter results

February 08, 2019 | About:

Following a shining report from Mattel Inc. (NASDAQ:MAT) on Thursday, shares of toymaker Hasbro Inc. (NASDAQ:HAS) tumbled as much as 10% in premarket trading on Friday morning after the company reported disappointing fourth-quarter and full-year 2018 results.

The Pawtucket, Rhode Island-based toy company, which is known for top brands like Play-Doh, Monopoly, Nerf and My Little Pony, posted adjusted earnings of $1.33 per share for the quarter, falling short of Refinitiv’s estimates of $1.67. Revenue declined 13% from the prior-year quarter to $1.39 billion, missing expectations of $1.52 billion.

For the year, the company recorded adjusted earnings of $3.85 per share on $4.58 billion in revenue, which declined 12% from 2017. Hasbro attributed the weak performance to lost revenues, which were higher than anticipated, from the closure of Toys ‘R’ Us stores, which was once one of its largest customers, and changing consumer tastes.

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In a statement, Chairman and CEO Brian Goldner characterized 2018 as “a very disruptive year” due to Toys ‘R’ Us’ bankruptcy and liquidation as well as a rapid shift in the global consumer and retail landscape, particularly in Europe.

“During 2018, we diversified our retailer base, meaningfully lowered retailer inventories and delivered innovative new offerings to our global consumers,” he said. “We were not, however, able to recapture as much of the Toys ‘R’ Us business during the holiday period as we anticipated as the effect of its liquidated inventory in the market was more impactful than we and industry experts expected.”

By segment, Hasbro saw sales in the U.S. and Canada fall 10%, while its international sales were dealt an even bigger blow with a decline of 17%. Its entertainment and licensing division saw 5% sales growth.

Its brand portfolio also took a major hit. Sales of Hasbro’s franchise brands, which include Nerf, Monopoly and My Little Pony, slid 8% to $729.9 million. The partner brands division, which encompasses merchandise for popular movies like “Star Wars” and “Frozen,” among others, saw sales slump 20% to $272.9 million. Sales in Hasbro’s gaming business, which includes Magic: The Gathering, Dungeons and Dragons and Jenga, tumbled 22% to $267.4 million.

The emerging brands category, however, saw sales grow 5% to $119 million. This segment accounts for newer toys like Furreal Friends, Playskool, Lost Kitties and Yellies.

Despite the overall poor performance, investors were encouraged by a promising lineup of new toys for 2019, stemming from Hasbro’s entertainment contracts for upcoming movies like “Star Wars: Episode IX,” “Captain Marvel,” “Avengers: Endgame” and “Frozen 2.” Goldman said the company is also launching new Nerf products and introducing Power Rangers toys this year.

Hasbro’s board of directors also increased the quarterly dividend by 8% to 68 cents per share.

With a market cap of $11.42 billion, shares of Hasbro were trading around 4.33% lower at $86.34 on Friday. After falling approximately 11% in 2018, GuruFocus estimates the stock has gained 11% year to date.

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Disclosure: No positions.

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About the author:

Sydnee Gatewood
I am an editorial assistant at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg

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