UPDATE: Hasbro 4Q Profit Down 15%; Adjusted EPS Top Street
07 Fevereiro 2011 - 2:31PM
Dow Jones News
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. revenue, and operating profit rose 35% for
the segment. Emerging markets are growing rapidly, executives said,
highlighting Brazil and Russia for particularly robust
increases.
A Hasbro spokesman couldn't promptly answer questions about the
results. The company 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 schemes 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 1.9% to $46.65 apiece in Monday morning
trading. The stock has gained 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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