Hasbro Inc. (
has reported third quarter 2012 adjusted earnings per share of
$1.28, surpassing the Zacks Consensus Estimate of $1.20 per
share. However, on a GAAP basis, earnings per share were $1.24,
slightly lower than $1.27 per share in the year-earlier quarter.
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Hasbro's net revenue of $1,345.1 million fell 2.2% from the
year-ago quarter and missed the Zacks Consensus Estimate of
$1,379.0 million. Foreign exchange had an unfavorable impact of
$47.4 million. The Girls market was the main savior of quarterly
Hasbro continued to return value to investors in the form of
share repurchases and dividend payments.
Hasbro experienced worldwide net revenue growth in only one of
its four major product categories -- Girls -- which increased 17%
to $302.3 million, on an annualized basis. The new initiatives
like the Furby and One Direction product, launched during the
quarter together with the introduction of several new holiday
products supported growth in revenue in the reported quarter.
Boys and Preschool categories fell 12% to $471.1 million and 5%
to $206.0 million, respectively. In the Boys category, Marvel
products continued to report solid year-over-year growth.
However, the Transformers and Beyblade brands declined in the
reported quarter after witnessing instability in the first
quarter of 2012. On the other hand, the Preschool category gained
from persistent growth in some product lines like Playskool
Heroes, and more, partially offset by a decline in Sesame Street
Revenue at the games category remained flat year over year at
$365.7 million. The Boys Action Gaming product line coupled with
other gaming products such as Twister, Battleship and more,
sustained to perform well in the reported quarter.
Geographically, net revenue from the U.S. and Canada segment
increased 1% year over year to $774.5 million and its operating
profit registered growth of 20% to $154.2 million.
Net revenue at the International segment dipped 7% year over year
to $524.1 million. However, excluding the adverse effect of
currency translation, revenue grew 1% in the quarter. Revenue in
the International segment reveals a tailwind from Latin America
but headwind from Europe and Asia-Pacific. The segment's
operating profit was $85.5 million, down 15% year over year.
The Entertainment and Licensing segment revenue declined 7% year
over year to $43.1 million. The segment's operating profit also
experienced a decline of 30% to $10.7 million on a year-over-year
As a percentage of net revenue, Hasbro's royalty expenses dipped
130 basis points (bps) to 6.6% and selling, distribution and
administration expenses declined 30 bps to 15.7%. Advertising
expenses were 10.0%, up 50 bps year over year as a percentage of
net revenue. However, cost of sales and product development
expenses remained flat year over year at 43.6% and 3.6%,
respectively. All these culminated to an operating margin
improvement of 60 bps to 18.6%.
At quarter end, total assets were $4,446.3 million compared with
$4,084.7 million at the end of the year-earlier quarter. Hasbro's
long-term debt was $1,398.9 million, compared with $1,405.1
million at the end of the prior year quarter.
Share repurchases & Dividend
Hasbro repurchased a total of 142,336 shares during the quarter
at a total cost of $5.2 million. At quarter end, $212.2 million
remained available in the current share repurchase authorization.
The company spent $46.9 million in cash dividends.
Management expects its fourth-quarter revenue growth to be driven
by the launch of innovative products coupled with an increase in
marketing initiatives. Consequently, 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 last quarter of
the year, strategic tie-ups, and its growing presence in the
emerging markets bode well for future growth.
Management's plan to shift shipments nearer to the peak buying
season in the fourth quarter in the U.S. should prove beneficial.
We heard a positive tone from Hasbro regarding its Holiday
initiatives. However, we prefer to remain on the sidelines at the
current level until we see any definite sign of materialization
of the aforesaid initiatives.
Hasbro currently retains a Zacks #4 Rank, which translates into a
short-term Sell 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. (
, surpassed the Zacks Consensus earnings per share and revenue
estimates in its third quarter 2012.