Hasbro reports lackluster first quarter sales primarily the result of the Toys R Us liquidation. Its entire portfolio took a big hit – plummeting 16 percent – but Hasbro asserts it is poised for growth in the future.
Hasbro, the maker of Nerf, Transformers, Play-Doh, Monopoly, and My Little Pony, reported lackluster first quarter revenue of $716.3 million with sales declining 16 percent as a direct consequence of Toys R Us closing and having liquidation sales. It missed analyst projections of $814 million by $97.7 million. For the first quarter, Hasbro reported a net loss of $112.5 million. In comparison, for the same period a year ago, Hasbro reported a profit of $68.6 million – a difference of $181.1 million.
Toys R Us generated roughly 10 percent of Hasbro’s business last year. Strong sales for Monopoly and toys related to Disney’s Marvel superhero franchise weren’t enough to offset the aftermath of the demise of Toys R Us.
Interestingly, toy sales in every category in its portfolio took a big hit for the first quarter. Franchise Brand sales (Nerf, Monopoly, and My Little Pony) declined 19 percent, while Partner Brands (Star Wars, Frozen, Marvel) dipped 6 percent in the fourth quarter. Meanwhile, Hasbro Gaming (Board Games/Digital Gaming) declined 22 percent and Emerging Brands (Baby Alive/FurReal Friends) dropped 6 percent. Tyler the Tiger was the company’s best-selling toy for the holidays.
Hasbro executives are looking past the lackluster results as a short-term dip as a result of Toys R Us closing. This is not surprising news given Hasbro had stated earlier this year that “the first quarter was expected to be difficult.” Hasbro was transparent about how Toys R Us’s bankruptcy would impact Hasbro for the first half of 2018. Brian Goldner, Chairman and CEO of Hasbro, said they are trying to “put the near-term disruption from Toys R Us behind us” and other retailers “view this as an opportunity in a key consumer category.”
Goldner is likely eluding to Walmart and Target, which generated 30 percent of the company’s sales last year. And there’s no denying Amazon is also becoming a major player in the world of toys and games. Goldner acknowledged that there is a “rapid shift to a converged retail environment.”
Furthermore, Deborah Thomas, Hasbro’s CFO, stated that these weak first quarter results “do not reflect the health of our underlying business.” She noted, “Our underlying financial strength is sound, and despite the near-term challenges associated with a major customer liquidation, Hasbro is positioned to manage a challenging 2018 and drive growth in 2019 and beyond.”
Thomas added, this “quarter’s revenue and profits were negatively impacted by lower revenues and higher expenses associated with events that do not reflect the health of our underlying business.”
Goldner stated: “New Hasbro initiatives shipping in this quarter and beyond won’t be caught up in the Toys R Us liquidation process. With the rapid shift to a converged retail environment, we accelerated plans we originally had spread throughout the year to transform our commercial organization on a more immediate basis.”
On the other hand, the Wall Street numbers indicate a different story. In fact, Hasbro’s stock has declined over 10 percent in the last twelve months.
Hasbro and Mattel are reportedly struggling because kids are playing games on smartphones and tablets as well as high-tech toys. According to reports, with the turmoil in toy land – there is speculation that Hasbro and Mattel could merge.
Mattel recently announced the departure of CEO Margo Georgiadis and her replacement Yvon Kreiz. With the new CEO, these merger discussions could reemerge, as they have so many times before.
According to CNN Money, Hasbro – the maker of Nerf, Transformers, Play-Doh, and My Little Pony – could be a dream partner for Mattel – maker of Barbie, Hot Wheels, American Girl, and Fisher-Price.
Evidently, Mattel is in worse shape than Hasbro. In just this year alone – its stock has dropped 15 percent and plunged nearly 50 percent in the last year. Analysts predict Mattel will report a bigger quarterly loss than last year.