More Angst as Hasbro’s 4th Quarter Earnings Report Approaches
Posted by Bret on 02/05 at 04:42 PM
CNBC reports that Hasbro will release its Q4 earnings on Wednesday, and there is definitely some concern due to a variety of factors.
Last Thursday, rival Mattel announced poor holiday results. Besides weakness within the company itself (which was partly the reason Hasbro had recently felt Mattel's depressed stock value was ripe for a buyout), Mattel's exposure to the Toys R Us bankruptcy was particularly high, as the retail chain accounts for 11% of Mattel's annual sales. Mattel surprised analysts by reporting a loss of $281.3 million for the 4th quarter, while a year ago they had posted a profit of $173.8 million. Even the relative strength of the Barbie brand was not enough to allow Mattel to stay in the black.
Hasbro had previously announced investor guidance of growth of 4-7% for the 4th quarter, but if the announcement falls short, it could mean another stock hit for Hasbro, even though the numbers would still show that the company his holding relatively strongly in a toy industry that saw a meager 1% global growth in 2017. Some analysts, including the one quoted by CNBC, predict that sales of toys from The Last Jedi may be weaker than expected, although they will likely be much stronger than sales from a year ago when Rogue One was released.
Hasbro also has significant exposure to the Toys R Us bankruptcy, although less so than Mattel. With 8% of sales coming from Toys R Us, Hasbro is a bit better positioned to absorb the blow. Hasbro also was owed significantly less by Toys R Us for outstanding inventory payments than Mattel.
According to one somewhat optimistic analyst:
[Hasbro] does, however, have a track record of successful holiday execution even in difficult environments, and historically has shown good expense control, so we believe there could be less bottom-line than top-line risk.
The toy industry is certainly changing. It remains to be seen if Hasbro can adapt more fluidly than Mattel. It also brings into question the future of Hasbro's Star Wars strategy. Do they continue to release a wide breadth of toy lines which have dubious demand from consumers, or do they re-focus by adding quality and variety to a narrower line of toys and highlight what has attracted kids, casual buyers, and hard-core collectors for over 40 years?