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Hasbro tumbles on disappointing Q3 results

Hasbro Inc. (HAS) tumbled over 6.9% in premarket hours on Monday after the company missed revenue and profit expectations for the third quarter of 2018.

Revenues declined 12% to $1.57 billion versus the same quarter last year, reflecting lost Toys R Us revenues in the US, Europe and Asia-Pacific. International revenues fell, particularly in Europe, as the company tried to deal with shifts in the retail landscape and customer behavior as well as retail inventory clearances. The market estimate was for revenues of $1.71 billion.

Hasbro third quarter 2018 Earnings Infographic
Hasbro Q3 2018 Earnings Infographic

Net income dropped to $263.9 million or $2.06 per share from $265.6 million or $2.09 per share in the prior-year period. Reported earnings included a favorable tax benefit from the US tax reform. Adjusted net income was $246.5 million or $1.93 per share, below the estimate of $2.23 per share.

The loss of Toys R Us revenues hurt many of the company’s markets such as the US, Europe, Australia and Asia and the volume of product liquidated in the second quarter impacted the third quarter sell-through and shipments.

Retail inventory decreased significantly in the US and Europe and the company is working hard to clear the excess inventory by the end of 2018. As a large number of retailers increase their allotted space to take a larger share of toys for the holiday season, Hasbro believes it is well-positioned to meet the upcoming demand.

The toymaker posted revenue declines across its US and Canada as well as International segments. The US and Canada segment was hurt by the loss of Toys R Us and the failure to meet its entire shipping demands late in the quarter across a vast retail footprint, while International revenues were negatively impacted by foreign exchange. In the International segment, revenues dropped across all regions as well as in emerging markets.

Revenues increased 45% in the Entertainment and Licensing segment, helped by a multi-year digital streaming deal for Hasbro television programming and revenues from the 2017 movie My Little Pony: The Movie.

Earnings Preview: Hasbro to show consistent improvement in Q3

Hasbro saw revenue decreases in its Franchise Brands and Partner Brands. In Hasbro Gaming as well as Emerging Brands, revenues increased, with Emerging Brands benefitting from new initiatives such as LOST KITTIES, LOCK STARS and YELLIES along with licensing revenues from POWER RANGERS.

The company paid $80 million in cash dividends during the quarter. The next quarterly dividend payment of $0.63 per common share is scheduled for November 15, 2018 to shareholders of record on November 1, 2018.


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