PAWTUCKET – Hasbro Inc. (NYSE: HAS) today posted a third-quarter profit of $138.23 million, a 14.45-percent decrease from the year-ago period’s $161.58 million, on net revenue that rose 6.45 percent to $1.30 billion. Strong sales of its Baby Alive, Furreal Friends, Littlest Pet Shop, Nerf and Star Wars toy lines, as well as classic board games and trading-card games, helped the toymaker exceed analyst expectations in the period ended Sept. 28.
The 2007 third-quarter results included a favorable one-time tax adjustment of $29.6 million, or 17 cents per diluted share, Hasbro noted. The company’s 2008 third-quarter results would have represented a 4.72-percent increase from the year-ago profit of $132 million excluding that one-time gain.
Net earnings per diluted share narrowed to 89 cents from the year-ago period’s 95 cents (or 78 cents, excluding the one-time gain). That exceeded the 86 cents per diluted share median prediction from a Bloomberg News survey of 11 industry analysts. The survey also underestimated the toymaker’s sales, calling for a third-quarter total of $1.26 billion.
“We are very pleased with our third quarter and year-to-date performance,” Brian Goldner, Hasbro’s president and CEO, said in a statement today. “In a challenging environment, we delivered both revenue and earnings growth.”
In the third quarter, Hasbro spent a total of $150 million to buy back 4 million shares of common stock, bringing its year-to-date share repurchases to $357.6 million and 11.7 million shares, for an average price of $30.47 per share. That left Hasbro with $252.4 million remaining in the current buyback authorization as of the quarter’s end at Sept. 28.
David D.R. Hargreaves, Hasbro’s chief operating officer and chief financial officer, said that “In light of all the uncertainty in the financial markets, I’m pleased that our balance sheet is strong and we continue to generate strong cash flow. In fact, over the last 12 months we generated $579.0 million in operating cash flows,” he said.
The company’s U.S. and Canada segment posted a third-quarter operating profit of $131.93 million – 7.39 percent higher than in the 2007 period – on sales that rose 6.14 percent to $821.03 million. The increase was led by growth in sales of Star Wars, Playskool, Nerf, Furreal Friends and Baby Alive toys, as well as and trading-card or board games such as Trivial Pursuit and Scrabble. “Additionally, Transformers and Littlest Pet Shop continued to contribute significantly to the segment,” Hasbro said.
Hasbro’s International segment had a third-quarter operating profit of $138.23 million – 14.45 percent lower than in the year-ago $161.58 million – despite revenue that grew 8.83 percent year over year to $460.46 million. Excluding the impact of favorable foreign exchange rates, segment revenue grew about 4 percent, Hasbro said. The sales growth was led by Littlest Pet Shop, Star Wars, Playskool, Furreal Friends and Baby Alive, plus trading-card or board games including Monopoly and Guess Who. Transformers also “continued to contribute significantly,” the company said.
Meanwhile, third-quarter results posted by rival Mattel Inc. lagged analyst expectations. The El Segundo, Calif.-based company reported a 0.55-percent increase in third-quarter net income, to $238.1 million from the year-ago from $236.8 million, on revenue that rose 5.9 percent to $1.95 billion. “Mattel got sidetracked” with its Bratz lawsuit and “and with the Chinese [lead-paint] problems,” Thomas Russo – a partner at Gardner Russo & Gardner in Lancaster, Pa., which owns shares in both toymakers – told Bloomberg Television today. “I think they’re just working their way back from that.”
The sluggish economy has spurred concerns about fourth-quarter sales at both companies. Holiday purchases traditionally have made the last three months of the year the most lucrative for both toymakers; in 2007, the last quarter accounted for more than 40 percent of full-year sales at both Hasbro and Mattell.
But Hasbro CEO Goldner said today that, “As we look to the remainder of the year, we are well positioned with the richest and most-diversified portfolio of brands in the industry.”
The Pawtucket toymaker’s holiday marketing campaign is focusing on a $180 animatronic puppy – Biscuit, My Lovin’ Pup, from the Furreal Friends line, which this month was ranked among Toy Insider’s “Hot 20” toys for 2008 (READ MORE) – and new versions of Hasbro’s classic board games Clue and Monopoly. Mattel is pushing its Elmo Live! red Muppet – another “Hot 20” pick – and its Fisher-Price preschool line.
Hasbro Inc. (NYSE: HAS) is a world leader in the design, manufacture and marketing of traditional and high-tech games and toys under brands including Playskool, Tonka, Milton Bradley, Parker Brothers, Tiger and Wizards of the Coast. Additional information about the company and its philanthropic arm, the Hasbro Children’s Fund, is available at www.hasbro.com.
