MAT Mattel Inc

Hasbro Inc.'s (HAS) fourth-quarter profit fell 15% as declining sales in the U.S and Canada, especially in games and puzzles, more than offset rising sales in the girls and international categories.

Games and puzzles revenue fell 22% versus the year-ago fourth quarter to $417.5 million, which management attributed to poor marketing during the holiday season. For example, Hasbro Chief Executive Brian Goldner said on a conference call to discuss results, last year marked 50 years since the board game "Life" was introduced, and the company did nothing new to generate interest.

Revenue in the U.S. and Canada dropped 20% to $604.8 million in the quarter, and operating profit for the region fell 54% to less than $71 million. For the company as a whole, the cost of sales rose to 43.2% of revenue from 40.9% in the 2009 fourth quarter.

International sales rose 12% during the quarter, and even slightly exceeded U.S. and Canada revenue, and operating profit rose 35% for the segment. Emerging markets are growing rapidly, executives said, highlighting Brazil and Russia for particularly robust increases.

Hasbro spokesman Wayne Charness confirmed that the fourth quarter marked the first quarter in company history where international revenues topped U.S. and Canada sales. Hasbro, of Pawtucket, R.I., pre-announced its results last month, and last week announced a 20% dividend boost.

The current quarter will see difficult comparisons with the same period last year, Hasbro said on the call, but it believes it can increase both its revenue and earnings per share for the full year. Products tied to movies coming out this year, like a third "Transformers" movie and films tied to comic-book characters Captain America and Thor, should boost sales.

During the first quarter, however, the company faces some inventory challenges related to both glut and dearth, having generally too much inventory at retail stores and in its warehouses, but not enough product to meet demand for its popular Beyblade toys.

The inventory situation, coupled with the lackluster sales of board games and puzzles, caused Hasbro not to bring workers back to its Massachusetts games factory after the holidays as quickly as it normally would have.

A significant portion of the company's growing cash position, as with many public, multinational U.S. companies, is housed in foreign countries, and Hasbro is examining ways to repatriate some of that cash. It noted that if it did repatriate cash it could change the company's effective tax rate; companies typically bemoan the high taxes on repatriated cash, and hope the U.S. government declares a temporary tax break on repatriation as it has occasionally done in the past. There are complex techniques designed to avoid the high taxes on repatriated cash, but there's no guarantee the Internal Revenue Service won't take issue with some of the techniques.

Unfavorable foreign-exchange rates crimped revenue by $17.7 million last year.

Executives said Hasbro has implemented a commercial paper program to issue short-term debt to fund its operations from time to time, saying this is a more cost-effective way to handle its needs.

Costs from the company's October launch of its Hub children's television channel with Discovery Communications Inc. (DISCA) also weighed on earnings. The company said last year it expected total capital spending on the channel would pressure earnings this year by 25 cents to 30 cents a share.

Larger rival Mattel Inc. (MAT) last week reported better-than-expected earnings, though it also entered the first quarter with significantly higher inventory over last year. Mattel said it was comfortable with its inventory levels.

Hasbro reported a fourth-quarter profit of $140 million, or 99 cents a share, down from $165.6 million, or $1.09 share, a year earlier. Adjusted earnings per share were $1.02, up from 99 cents the prior year.

Analysts polled by Thomson Reuters most recently expected a per-share profit of 92 cents.

Revenue fell 7% to $1.28 billion, roughly in line with the $1.3 billion it projected last month. Gross margin narrowed to 15.7% from 17.7%.

Girls' product sales grew 10%, while Hasbro's boys' product segment edged down 1% revenue-wise.

Shares of Hasbro rose 1.77% to $45.62 apiece in Monday trading. The stock has gained about 48% over the past year.

-By Maxwell Murphy, Dow Jones Newswires; 212-416-2171; maxwell.murphy@dowjones.com

--Drew FitzGerald contributed to this article.

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