) fourth-quarter 2012 adjusted earnings per share of $1.20 were
in line with the Zacks Consensus Estimate and increased 13.2%
year over year.
However, on a reported basis, including restructuring charges,
earnings per share were 99 cents, down 6.6% from the year-earlier
Hasbro's net revenues of $1.28 billion fell 3.8% from the
year-ago quarter and missed the Zacks Consensus Estimate by 7.2%.
Revenues include a negative $8.2 million impact from currency
translation. The Boys and Preschool product categories were
dampeners to quarterly revenues.
Lower holiday product sales in the U.S. and some international
markets were also responsible for the lower sales. However, the
company recorded higher adjusted earnings on the back of
efficient cost management.
Hasbro continues to return value to investors. In the fourth
quarter, Hasbro raised its quarterly cash dividend by 11% to 40
cents per share, payable in May 2013.
Behind the Headline Numbers
Hasbro experienced worldwide net revenue growth in two of its
four major product categories; Girls & Games.
The Girls category surged 17.0% to $292.6 million year over year.
The Furby, My Little Pony and One Direction products supported
revenue growth. Revenues at the games category grew 25% to $428.6
million. The Boys Action Gaming product line and Angry Birds Star
Wars performed well in the reported quarter.
Boys and Preschool categories fell 23% to $414.1 million and 13%
to $148.3 million, respectively. In the Boys category, the
Transformers lagged a bit. On the other hand, the Preschool
category experienced difficult comparisons due to the initial
launch of Sesame Street products in 2011.
Geographically, net revenues from the U.S. and Canada segments
inched up 2% year over year to $606.2 million, reflecting growth
in the Girls and Games categories, partially offset by sluggish
performance in Boys and Preschool categories.
Though the revenue increase was only marginal, the segment's
operating profit registered a huge increase of 76.0% to $89.5
million driven by improved product mix as well as inventory
Net revenues at the International segment dipped 9% year over
year to $607.8 million. Revenues in the International segment
reflect a tailwind from Latin America (flat year over) but a
headwind from Europe (down 13.0%) and Asia-Pacific (down 1.0%).
The segment's operating profit was $105.3 million, down 24.0%
year over year due to an unfavorable mix as the low-margin
emerging markets did better than the high-margin developed
Entertainment and Licensing segment revenues grew 3% year over
year to $65.8 million. The sale of television programming in all
formats in the U.S. and abroad drove segment revenues while lower
movie-related revenues acted as an offsetting factor. The
segment's operating profit witnessed an increase of 23% to $26.5
million on a year-over-year basis driven by higher revenues and
improved expense leverage.
As a percentage of net revenues, Hasbro's royalty expenses fell
90 basis points (bps), and cost of sales dipped 430 bps while
product development, advertising and selling-distribution
expenses grew 100 bps, 90 bps and 390 bps, respectively. All
these culminated to an operating margin contraction of 70 bps to
In 2012, adjusted earnings were $2.81 per share, up 2.6% year
over year mainly due to cost curtailment. On a reported basis,
including restructuring charges, Hasbro's earnings were $2.55 per
share, considerably down from the year-ago earnings of $2.82 per
The company's net sales were $4.09 billion, down 4.7% year over
year. Excluding a $98.5 million negative impact from foreign
exchange, full year 2012 revenues declined 2%. The decline was
mainly due to underperformance in the developed markets.
In the fourth quarter, Hasbro adopted a program to save up to
$100 million annually by 2015. Its cost saving measures include a
10% reduction in workforce, facility consolidation and the
implementation of process improvements.
Share Repurchase & Dividend Hike
Hasbro repurchased a total of 2.7 million shares during 2012 at
an average price of $37.11 per share. At year end, $127.3 million
remained available in the current share repurchase authorization.
Hasbro raised its quarterly cash dividend by 11% to 40 cents per
share, which will be payable on May 15, 2013 to shareholders of
record as of May 1, 2013.
Hasbro currently carries a Zacks Rank #3 (Hold). The comapny has
been reeling under pressure for the last few quarters mainly in
terms of its revenues. However, we have a favorable view of the
company's persistent efforts to curtail costs and at least score
on earnings amid a sluggish operating environment. Persistent
share buyback activity and a dividend hike also come across as a
ray of hope for investors.
The company is on a restructuring mode involving several brand
building and cost saving initiatives. From the inventory point of
view also, Hasbro remains well-positioned at the start of 2013.
However, we would still prefer to remain on the sidelines at the
current level until we see any definite sign of materialization
of aforesaid initiatives.
As a point of reference, one of the major toy companies,
) missed on both lines in its fourth quarter. However, some Zacks
Rank #1 (Strong Buy) toy companies that warrant a look at present
LeapFrog Enterprises Inc.
Nintendo Co. Ltd.
HASBRO INC (HAS): Free Stock Analysis Report
LEAPFROG ENTRPS (LF): Free Stock Analysis
MATTEL INC (MAT): Free Stock Analysis Report
(NTDOY): ETF Research Reports
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