Hasbro Inc. (HAS) has reported first quarter 2012 adjusted earnings per share of 4 cents, which lagged the Zacks Consensus Estimate of 7 cents. The earnings were also below the year-ago level of 12 cents. On a GAAP basis, Hasbro reported a 2 cents loss in the quarter.
Hasbro’s net revenue of $648.9 million slid 3.0% from the year-ago quarter and also missed the Zacks Consensus Estimate of $670.0 million. Foreign exchange had an unfavorable impact of $8.5 million. Revenue could not utilize one extra week of operation in the first quarter of 2012 compared to the year-earlier quarter.
After an outperformance for quite some time, the Transformers and Beyblade brands were flat in the quarter. Entertainment backed brands like Marvel, Star Wars, Kre-O were the factors to be thanked for the contribution to revenue.
Hasbro continued to return value to investors in the form of a share repurchase and dividend distribution.
Hasbro experienced worldwide net revenue growth in two of its four major product categories, namely Boys and preschool which inched up a respective 4% and 2% to $302.8 and $69.9 million, on an annualized basis. On the other hand, Girls and Games categories fell 18% to $93.2 million and 9% to $181.9 million, respectively.
Geographically, net revenue from the U.S. and Canada segment declined 16% year over year to $329.0 million, while its operating profit registered a steeper decline of 65% to $14.4 million. The International segment reported net revenue of $289.7 million, up 14% year over year. The segment’s operating loss was $5.1 million versus $1.7 million loss recorded in the year-ago quarter.
The Entertainment and Licensing segment experienced a 19% year-over-year jump in revenue to $29.3 million. But the segment’s operating profit showed a greater increment of 42% to reach $7.7 million.
We noticed a 21.3% rise in Hasbro’s royalty expenses from the prior-year period to $21.3 million. Product development expenses totaled $44.9 million, down 2.0% year over year. Advertising expenses decreased 2.3% from the prior-year quarter to $65.0 million. Selling, distribution and administration expenses also increased 7.5% to $199.9 million.
At quarter end, total assets were $3.88 billion compared with $3.94 billion at the end of the year-earlier quarter. Hasbro’s long-term debt was $1.40 billion, almost flat year over year.
Hasbro repurchased a total of 139,656 shares during the quarter at a total cost of $5.0 million. At quarter-end, $222.3 million remained available in the current share repurchase authorization.
Management expects year-over-year growth in revenue and earnings per share for 2012 excluding the impact of foreign currency translation.
Hasbro’s strong product line-up slated for the second half of the year, strategic tie-ups, and its growing presence in emerging geographical regions bode well for future growth.
However, the Consensus miss in the first quarter concern us a bit. Management commented that this underperformance was expected as it planned for a back-end loaded year.
Hasbro currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are maintaining our long-term Neutral recommendation on the stock. As a point of reference, one of Hasbro’s major peers Mattel Inc. (MAT) missed the Zacks Consensus Estimate in its first quarter 2012 earnings per share and revenue.Read the Full Research Report on HAS
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