Griswald blog

Hasbro 4Q earnings fall on soft US game demand

NEW YORK – Hasbro Inc.'s earnings slipped 16 percent in the fourth quarter as U.S. demand for board games waned later in the year.

But the toy maker's net income still beat Wall Street expectations, and the company said it expects earnings and revenue growth in 2011.

Hasbro, which raised its quarterly dividend by 20 percent four days ago, admits it had some missteps in its games category in the fourth quarter, including trying to promote too many products at the same time. It makes many of the classics, including Life, Clue, Cranium and Battleship.

The fourth quarter is a crucial one for toy makers because it includes the holiday season. The period can often make up nearly a third of annual revenue.

Hasbro's quarterly net income fell to $140 million, or 99 cents per share, for the three months ended Dec. 26. That compares with $165.6 million, or $1.09 per share, a year ago.

This surpassed the 93 cents per share that analysts surveyed by FactSet predicted.

The company's stock gained 61 cents to $45.43 in Monday morning trading.

Last week rival Mattel reported its quarterly profit edged down while revenue rose.

Mattel, the nation's biggest toy maker, said it plans to raise prices in the second-quarter by mid- to high-single-digit percentages to deal with rising material and shipping costs.

Hasbro Chief Operating Officer David Hargreaves said his company is likely averaging mid-single-digit price increases, but can raise prices further later in the year if deemed necessary.

Hasbro's fourth-quarter revenue dropped 7 percent to $1.28 billion from $1.38 billion, missing Wall Street's average estimate of $1.31 billion.

The revenue decline was expected by the company, which warned in January that revenue would likely fall as demand slowed late in the holiday season. Foreign exchange had a $23.5 million drag on the quarterly results.

The company based in Pawtucket, R.I., reported revenue declines for its U.S. and Canada segment and for its entertainment and licensing division. International revenue improved.

Emerging markets gave a boost to international results during the year, but the company lacked significant movie-tie ins. Hasbro benefited in 2009 from sales of "Transformers" and "G.I. Joe" toys, as both brands were featured in movies that year.

Hasbro's games and puzzles category posted a 22 percent revenue decline in the quarter. Revenue for boys' products dipped 1 percent. The company reported revenue increases for girls' products and preschool products.

President and CEO Brian Goldner said during a conference call that Tonka, Play-Doh and Furreal Friends were among the products that sold well in 2010. The Nerf brand was the biggest seller of the year, posting a 51 percent increase.

The toy maker expects stronger results in 2011 partly on the international distribution of programs from The Hub television network, which launched in October.

It is also looking to capitalize on the "Transformers" brand making a return to the movies with the film "Transformers: Dark of the Moon." Other movie tie-ins include "Thor" and "Captain America: The First Avenger."

Goldner also anticipates Hasbro's preschool business will benefit from the addition of the Sesame Street brand in 2011.

For the full year, Hasbro's net income climbed 6 percent to $397.8 million, or $2.74 per share, from $374.9 million, or $2.48 per share, in the previous year.

The full-year results included a favorable tax adjustment of $21.2 million, or 15 cents per share. Excluding the adjustment, earnings were $2.59 per share.

Annual revenue dipped 2 percent to $4 billion. Foreign exchange hurt revenue by $17.7 million.

Looking ahead to 2012, Goldner said Hasbro will have products linked to movies including "The Avengers," "Battleship" and a 3-D version of "Star Wars: Episode 1 The Phantom Menace."