Hasbro Earnings Up, But Miss Estimates

Fri Jul 16, 2004
By Angela Moore

NEW YORK (Reuters) - Hasbro Inc (HAS.N: Quote, Profile, Research) , the No. 2 U.S. toymaker, on Friday reported a weaker-than-expected rise in second-quarter earnings, as sales of its once-hot Beyblade battling top toys declined.

Pawtucket, Rhode Island-based Hasbro, which also makes Tonka trucks and the Easy-Bake oven, posted net income of $18.8 million, or 6 cents per share, up from $11.4 million, or 6 cents per share, a year earlier.

Analysts, on average, had expected profit of 8 cents per share, according to Reuters Estimates.

Chief Executive Alfred Verrecchia said he was confident Hasbro could meet its full-year goal of increased revenue and earnings, despite an uncertain retail environment and an expected decline from Beyblade.

Investors, however, reacted negatively and Hasbro shares fell 2 percent to $17.63 on the New York Stock Exchange.

"We believe that it will be difficult for Hasbro to enjoy meaningful top-line growth in (2004) with large declines in these product lines. Hasbro faces a very tough 18 percent revenue comparison" in the third quarter, Banc of Americas Securities analyst Gary Cooper said in a research note.

The U.S. toy-selling environment has been weak, as cut-throat price competition and slowing sales have pushed retailers like KB Toys and FAO Schwarz into bankruptcy. Toys R Us Inc. (TOY.N: Quote, Profile, Research) , the No. 2 toy seller, is evaluating its operations and analysts expect it to close some stores.

Verrecchia said on the earnings conference call that Hasbro expects some store closing and some consolidation among toy retailers. Toys R Us is Hasbro's No. 2 retail account after Wal-Mart.

Hasbro is still seeing retailers ratchet back inventory in the first half of the year, Verrecchia said. In the short term these issues will impact performance, he said.

"Longer term I believe these issues will resolve themselves so there will be more than enough doors to satisfy consumer demands," he said.

Hasbro has been a strong performer in recent quarters as it benefited from a restructuring, but it may not be able to keep up the momentum.

Revenue for the second quarter fell to $516.4 million from $581.5 million a year ago. Revenue included a benefit of $8.0 million from the weak dollar, which raises the value of overseas sales when they are converted into dollars.

Revenue in the U.S. Toys segment, which includes products like My Little Pony and Play-Doh, was $167.2 million, compared with $208.4 million a year ago, reflecting an overall softness in the boys business, including a decline in Beyblade, GI Joe and Transformers.

On the conference call Verrecchia said the decline was partially due to competition from toys based on the recent Spider-Man movie.

International revenue slipped to $179.2 million from $203.8 million a year ago, also hurt by weak Beyblade performance.

Hasbro said it is planning more new product launches in the second half of this year, compared with 2003, including a color version of its handheld video player VideoNow, Lazer Tag, and is bringing back the wobbling Weebles figures.

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