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Hasbro's (HAS) Q2 Earnings & Revenues Surpass Estimates

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Hasbro's (HAS) Q2 Earnings & Revenues Surpass Estimates

Toys 'R' Us liquidation and tighter retail inventory management significantly affect Hasbro's (HAS) second-quarter revenues and earnings.

Hasbro Inc. HAS has reported results for the second quarter of 2018, wherein both earnings and revenues topped the Zacks Consensus Estimate.

Adjusted earnings of 48 cents per share surpassed the consensus mark of 29 cents by 65.5%. However, the bottom line declined 9.4% from the prior-year quarter’s number.

Net revenues of $904.5 million exceeded the consensus mark of $844.2 million by 7.1% but, decreased 7% from the prior-year quarter. The decline in revenues can be primarily attributed to the liquidation of Toys “R” Us in the United States and other global markets. International revenues were also affected by the managing of the retail inventory amid a budding retail scene.

In the past year, the stock has declined 10.5% against the industry’s rally of 23.6%.

Brand Portfolio Performances

The Franchise Brand portfolio posted revenues of $506.5 million, down 8% year over year. Increases in sales at MONOPOLY, MAGIC: THE GATHERING and BABY ALIVE were overshadowed by a dismal performance at other Franchise Brands — including TRANSFORMERS. Revenues also declined in the United States and Canada as well as the International segments. However, Franchise revenues increased in the Entertainment and Licensing segment.

Partner Brand revenues slumped 10% to $208 million due to a decline at all other Partner Brands except for MARVEL and BEYBLADE. Revenues also slowed down in the United States and Canada, and International segments.

The Hasbro Gaming revenues increased marginally year over year to $134.3 million. Robust performances of DUNGEONS and DRAGONS, JENGA, DUEL MASTER and DON’T STEP IN IT were overshadowed by the weakness at other properties.Hasbro Gaming revenues increased in both the International segment, and the Entertainment and Licensing segment; but, declined in the United States and Canada segment. Notably, the company’s total gaming category in the quarter under review was up 14% to $312.8 million.

Emerging Brands revenues were down 1% year over year to $55.6 million.

Segmental Performance

Regionally, net revenues from the United States and Canada segment decreased 7% to $459.3 million. The segment was negatively impacted by the Toys “R” Us liquidation and the near-term disruptions of stores in both the places, partially offset by a favorable product mix. Consequently, the operating profit margin improved 10 basis points (bps) year over year.

International segment revenues were $380.4 million, down 11% year over year, primarily due to Toys “R” Us U.K. liquidation and the company’s efforts to clear unsold inventory in Europe. The segment recorded operating profit of $0.2 million in comparison with operating profit of $16.9 million in the second quarter of 2017.

However, the Entertainment and licensing segment revenues grew 26% year over year to $64.7 million, backed by improved consumer products. Also, the segment's operating profit margin improved 680 bps from the prior-year quarter.

Hasbro, Inc. Price, Consensus and EPS Surprise


Hasbro, Inc. Price, Consensus and EPS Surprise | Hasbro, Inc. Quote

Operating Highlights

Hasbro's cost of sales, as a percentage of net revenues, decreased 50 bps to 37.4%. Meanwhile, selling, distribution and administration expenses, as a percentage of net revenues, increased 160 bps from the prior-year quarter. Overall operating margin declined 60 bps year over year in the quarter under review.

Balance Sheet

Cash and cash equivalents as of Jul 1, 2018, were $1.2 billion, down from $1.4 billion as of Jul 2, 2017. At the end of the reported quarter, inventories totaled $610.2 million compared with $557.5 million in the prior-year quarter.

Long-term debt increased to nearly $1,694 million as of Jul 1, 2018, from $1,199 million as of Jul 2, 2017.

Hasbro’s board of directors declared a quarterly cash dividend of 63 cents per common share. The dividend will be payable on Aug 15, 2018, to shareholders of record at the close of business as of Aug 1, 2018.

In the second quarter, the company paid $78.7 million in cash dividends to shareholders and repurchased share worth $74.1 million. At the end of the reported quarter, $565.1 million was available under the current share repurchase authorization.

Zacks Rank & Stocks to Consider

Hasbro currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks from the Consumer Discretionary sector include Activision Blizzard ATVI, JAKKS Pacific JAKK and Boyd Gaming BYD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Activision Blizzard, JAKKS Pacific and Boyd Gaming’s earnings for 2018 are expected to increase 15.4%, 53.9% and 27.2%, respectively.

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