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Jul 24, 2017

Hasbro posts smallest sales beat in 1.5 years, shares fall

Trasnformers

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Toymaker Hasbro Inc's quarterly sales scraped past analysts' estimates, marking its smallest beat in more than one and a half years, propped up by demand for its Transformers and Nerf toys in the United States.

Hasbro's shares fell as much as 9.2 per cent to US$105.27 on Monday as investors anticipated another strong quarterly sales beat. Hasbro's stock has risen about 50 per cent this year, making it one of the top performers on the S&P 500 index.

"The stock was very strong heading into the quarterly report, so it sets the bar very high," D.A. Davidson analyst Linda Weiser said.

The company's high valuation compared with its peers as well as comments from management about the shift in sales to the fourth quarter were weighing on shares, she added.

Hasbro trades at 22.79 times forward earnings compared with its media peers, which trade between 20 and 22 times, according to brokerage firm Jefferies.

On a post-earnings call, CFO Deborah Thomas said the timing of movie franchises this year, a shift to higher e-commerce spending in the holiday season, and customers' focus on sourcing inventory just-in-time, would see more fourth-quarter toy launches than in the third quarter.

"We believe the fourth quarter could represent a greater percentage of full-year revenues than historical norms."

Movies releasing in the later half of the year, include Star Wars: The Last Jedi, My Little Pony: The Movie and Thor: Ragnarok.

Larger rival Mattel Inc's shares were down about 5 percent at $20.52 after Hasbro's management said there was excess inventory in some countries, especially in Europe.

TRANSFORMERS BOOST

On Monday, the No. 2 U.S. toymaker reported revenue that rose 10.6 percent to US$972.5 million, edging past analysts' average estimate of US$972.4 million, according to Thomson Reuters I/B/E/S.

Hasbro's revenue has on average beaten analysts' estimates by 6 percent in the past six quarters, according to Thomson Reuters data, but came in flat this quarter.

The roll out of "Transformers: The Last Knight" toys like Autobots, Decepticons and others based on the film's main characters such as Megatron and Bumblebee in February, helped sales in the second quarter ended July 2.

However, net revenue from Hasbro's partner brands business, which sells toys related to Marvel and Star Wars, rose just 1 per cent.

Excluding certain items, Hasbro earned 53 cents per share, beating analysts' estimate by 7 cents.