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Hasbro Q4 Earnings: stock slides as Toys ‘R’ Us shutdown hits holiday sales

Toymaker Hasbro, Inc. (HAS) reported its fourth-quarter 2018 earnings on Feb. 8, before the opening bell. Soon after the announcement, Hasbro stock fell in pre-market trade as Toys ‘R’ Us shutdown pushed holiday sales well below analyst estimates.

Net revenues for the quarter fell 13% to $1.39 billion, while net profit was $8.8million or $0.07 per diluted share.

Adjusted net earnings were $169.6 million or $1.33 per diluted share, excluding net after-tax charges of $160.8 million (or $1.26 per diluted share.)

The Street expected non-GAAP earnings of about $1.68 a share on revenue of $1.52 billion.

Hasbro Fourth Quarter 2018 Earnings Infographic
Hasbro Fourth Quarter 2018 Earnings Infographic

Traditional toymakers have been suffering from sliding consumer demand and a corresponding sales crunch, and heavily hit by the liquidation of retailers such as Toys ‘R’ Us.

“2018 was a very disruptive year, driven by the bankruptcy and liquidation of Toys ‘R’ Us across most of the world and a rapidly shifting consumer and retail landscape,” weighed in Hasbro CEO Brian Goldner.

“We were not… …able to recapture as much of the Toys ‘R’ Us business during the holiday period as we anticipated as the effect of its liquidated inventory in the market was more impactful than we and industry experts expected,” he added.

Hasbro Q4 Earnings
Hasbro is the maker of the famous toy line TRANSFORMERS (CREDIT: Hasbro)

The maker of famous brands such as NERF and TRANSFORMERS and board games such as Monopoly, Hasbro has always been an industry giant. But the company is forced to diversify into tech-based products to tackle the latest taste of youngsters.

New offerings of video games, MP3 players, tablets, smartphones and other electronic devices have put pressure on both top-line and bottom-line by driving costs higher, and it might take a few more quarters for Hasbro to recover.

During the quarter, Hasbro’s adjusted net earnings excluded $96.9 million or $0.76 per diluted share, associated with non-cash impairment charges related to Backflip Studios goodwill and other intangible assets. The metric also excluded charges such as $62.2 million or $0.49 per diluted share of severance costs and $10.2 million or $0.08 per diluted share associated with the US tax reform, and a benefit of $8.5 million or $0.07 per diluted share from the recovery of pre-bankruptcy receivables based on the Hasbro’s final settlement with Toys ‘R’ Us.

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The quarterly revenue was primarily hit by the loss of Toys ‘R’ Us revenues in the US, Europe and Asia Pacific, “including a larger-than-expected impact from liquidated inventory in the markets.”

According to the company’s investor presentation, the “rapidly evolving retail landscape and reduced retailer inventory amidst challenging economic conditions in key markets, notably the UK” also added to the company’s top-line woes.

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