- The Washington Times - Monday, April 20, 2009

NEW YORK (AP) - Hasbro Inc. said Monday that first-quarter profit fell 47 percent as retailers cut back on their inventory, but the toy maker said products tied into new movies like the upcoming Transformers film should boost future results.

The maker of board games such as Clue and Scrabble also said it instituted a salary freeze and is hiring only for critical positions in an effort to cut costs.

“We don’t believe these results are a reflection of the underlying strength of our brands,” Chief Executive Brian Goldner said in a conference call. Instead, he said, they were a by-product of retailers cutting inventory levels in the poor economy.

Profit for the three months ended March 29 fell to $19.7 million, or 14 cents per share, from $37.5 million, or 25 cents per share. That matched the estimate of analysts polled by Thomson Reuters.

Revenue dropped 12 percent to $621.3 million from $704.2 million. Excluding the stronger dollar, revenue fell about 6 percent. Hasbro has more than 40 percent of its sales in other countries. Analysts had expected revenue of $644.9 million.

Goldner said the company expected revenue to decline because of the economy, the impact of the stronger dollar and retailers cutting inventory.

At Hasbro’s larger rival Mattel Inc., sales had fallen 15 percent overall in the first quarter because of the stronger dollar and cautious orders from stores that are still feeling the sting from the holidays.

Retailers have been lowering inventory levels after one of the weakest holiday seasons in decades. Hasbro suggested Monday that the worst could be over, saying its shipments fell in January and February but rose in March.

“In the U.S. we’re probably through the worst of it,” Chief Financial Officer David Hargreaves said, but added, “I’m not sure we are in some of the international markets,” including Australia.

Star Wars, Playskool, Nerf and board game sales were strong in the U.S., but sales of Littlest Pet Shop, Transformers and Marvel brands declined. Internationally, Star Wars and Nerf sales were strong while Transformers and My Little Pony sales fell.

The first quarter is the least important season for toy makers. Last week, Mattel reported a loss of $51 million for the quarter ended March 31, but got a boost from heavily promoted the 50th anniversary of its Barbie brand during the quarter.

Pawtucket, R.I.-based Hasbro expects its results to improve as the year goes on, since it has products tied to several upcoming movies including “X-Men Origins: Wolverine,” which opens on May 1, “Transformers: Revenge of the Fallen,” which opens June 24, and “G.I. Joe: The Rise of Cobra,” which opens Aug. 7.

It expects revenue and earnings to rise in the next three quarters, though it did not give specifics.

“Based on the strength of our product line, we believe the two most recent quarters will prove to have been the most challenging for Hasbro in this economic cycle,” Hargreaves said.

Hasbro shares fell 75 cents, or 2.7 percent, to close at $27.16 Monday.

“We would use any weakness as an opportunity to build positions,” said Wachovia analyst Tim Conder, who reiterated his ‘Outperform’ rating on the stock. “We believe toy companies have an opportunity to post solid (2009) earnings growth within an overall challenging consumer environment.”

LOAD COMMENTS ()

 

Click to Read More

Click to Hide