Hasbro Releases Earnings Report

Posted by Bret on 02/07 at 11:59 AM Category: Hasbro
CNBC reports that Hasbro announced its holiday/Q4 earnings this morning, right on the heels of Disney's Q1-18 report.

Similar to what we reported yesterday for Disney, Hasbro had a sharp increase in earnings per share, but a decline in revenues:

EPS: $2.30 vs. $1.80 expected.
Revenue: $1.60 billion vs. $1.72 billion projected.

The EPS (earnings per share) number was very much higher than expected, like Disney, and was largely due to the recent change in tax law.

CEO Brian Goldner said in a statement:

"Overall consumer demand slowed in November and December both for the industry and for Hasbro. A decline in Partner Brands and Europe revenues resulted in us not meeting our fourth quarter revenue expectations."

There was a noticeable drop in "Partner Brands", the division of Hasbro that relates to items like Star Wars and Marvel. According to another CNBC report via Reuters:

However, 2017 was the worst year for movie ticket sales since 1992, according to Box Office Mojo, as moviegoers lost interest in sequels, in turn affecting the market for toys based on movie characters like Iron Man and Luke Skywalker.

It's hard to pin Hasbro's drop in revenue to something as simple as the prevalence of 5POA Star Wars figures. It's certainly something that our demographic would be focused on, but there's a lot more at play here, including changing tax laws, drops in box office sales, the Toys R Us bankruptcy, and the changing toy industry in general. Even if Hasbro decided to dump all current plans and only sell super-articulated collector figures, it doesn't seem that this would make much of a difference to the big picture. From a merchandising standpoint, Hasbro certainly has its hands full keeping up with all the source materials that are being churned out at a dizzying pace. Goldner even echoed a point we've made before, about the large gap between Force Friday launches, and the actual film release over three months later, specifically mentioning that toys for other media took the spotlight during the gap:

The company said it doesn't see the fall in sales as "Star Wars fatigue," but rather a result of the timing of the merchandise release and advertisements. Goldner said that between Force Friday, a September merchandising event, and the release of "The Last Jedi" in December, customers were bombarded with products from other entertainment properties, like "Thor: Ragnorak" and "Justice League. "So narrowing those windows so you're really able to take advantage of the specific marketing and these big marketing campaigns around the brands enables you to do quite a strong job in merchandising those films.

Interestingly, after a pre-market drop, Hasbro stock has surged over 6% so far today, and was briefly over $100 per share, for the first time since the stock dropped below that number on August 9th. Investors are probably bargain hunting, and seem confident that Hasbro's strength will allow it to weather all the challenges in the near future. Goldner added that Hasbro will manage to "right-size" their business partnership with Toys R Us in 2018, which will alleviate the exposure to the bankruptcy. Toys R Us has also announced their goal to emerge from bankruptcy later this year.

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