Stocks moved mostly sideways during Monday's session as investors look forward to a large number of earnings reports this week, but they ultimately ended the day down. The Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) both had moderate losses.
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The banking sector helped pull the market lower despite some positive earnings reports earlier this month, with the SPDR S&P Bank ETF (NYSEMKT: KBE) falling 2.8%. Technology stocks staged a rally in advance of some big earnings reports, and the Technology Select Sector SPDR ETF (NYSEMKT: XLK) closed up 0.8%.
As for individual stocks, Hasbro's (NASDAQ: HAS) recovery from the Toys R Us liquidation will take longer than expected, and Polaris Industries (NYSE: PII) reported strong profit growth.
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Hasbro continues to struggle with retail disruption
Toymaker Hasbro reported disappointing third-quarter results, as the company continues to deal with channel disruption due to the bankruptcy of Toys R Us. Hasbro indicated that the issues may continue into 2019, and shares slumped 3.1%. Revenue dropped 12.4% to $1.57 billion and earnings per share fell 1.4% to $2.06. Wall Street analysts were expecting the company to earn $2.23 per share on a revenue decline of only 4.5%.
The international segment of Hasbro's business was hit the hardest, with a 24% drop in revenue. The company said that the Toys R Us transition is happening more slowly in Europe than in North America, and also blamed "changing consumer behaviors" and a "rapidly evolving retail landscape" in that region. Sales in the U.S. and Canada fell 7%.
Continued disruption due to the liquidation of Toys R Us inventory was expected, but investors likely were discouraged that recovery will take longer than expected, especially in Europe. Hasbro had originally set expectations that the second half of the year would be considerably better than the first, but admitted on the conference call that so far, the company has only recaptured about a third of lost revenue from the failed retail chain, and that the disruption will continue for the next few quarters.
Polaris grows profits in spite of tariff headwind
Shares of Polaris Industries, maker of motorcycles and off-road vehicles, jumped 2.7% after the company reported better-than-expected profit growth. Sales increased 11.6% to $1.65 billion, edging out the analyst consensus of $1.64 billion. Adjusted earnings per share grew 22% to $1.86, well ahead of expectations for $1.57 per share.
Sales of off-road vehicles grew 2.9% to $1.04 billion and motorcycle sales were flat at $155 million. The company got a top-line boost from the acquisition earlier this year of Boat Holdings, which contributed sales of $134 million.
Polaris had warned last quarter of the impact from tariffs, which hit the company with the double whammy of 1. higher prices for steel, aluminum, and components, and 2. retaliatory tariffs on its products by the European Union. The effect of tariffs in the quarter was less than expected, and the company is fighting back through negotiations with suppliers and transferring production to Europe to avoid the retaliatory tariffs.
Looking forward, Polaris is maintaining its full-year guidance. "Our goals do not eliminate or even diminish the serious challenges we face from tariffs, but they certainly increase our resolve to find acceptable solutions or offsets," said CEO Scott Wine. "We are making too much progress with our supply chain, safety and quality and innovation initiatives to have the benefits wiped out by protracted trade negotiations."
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