Spielwarenmesse: Hasbro reports third quarter 2018 financial results

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Hasbro reports third quarter 2018 financial results

22. October 2018 16:11 h:

  • Third quarter 2018 revenues of $1.57 billion;
  • U.S. and Canada segment revenues down 7%; International segment revenues down 24%; Entertainment and Licensing revenues up 45%;
  • Operating profit margin of 20.0% versus 20.1% in third quarter 2017;
  • Reported net earnings of $263.9 million, or $2.06 per diluted share;
  • $907.1 million in cash at quarter end; Returned $159.5 million to shareholders in the quarter, including $80.0 million in dividends and $79.5 million in share repurchases.

Hasbro, Inc. today reported financial results for the third quarter 2018. Net revenues for the third quarter 2018 decreased 12% to $1.57 billion versus $1.79 billion in 2017. The lower revenues reflect lost Toys“R”Us revenues in the U.S., Europe and Asia Pacific. In addition, revenues declined internationally, most notably in Europe, as the Company addresses changing consumer shopping behaviors, a rapidly evolving retail landscape and clearing through retail inventory. Foreign exchange had a negative impact of $32.0 million, or 2%, on third quarter 2018 revenues.

Net earnings for the third quarter 2018 were $263.9 million, or $2.06 per diluted share, compared to $265.6 million, or $2.09 per diluted share, for the third quarter of 2017. Reported net earnings include a favorable $17.3 million, or $0.14 per diluted share, tax benefit from U.S. tax reform. Adjusted third quarter 2018 net earnings were $246.5 million, or $1.93 per diluted share.

Third quarter 2018 U.S. and Canada segment net revenues decreased 7% to $924.2 million compared to $993.8 million in 2017. The segment reported an operating profit of $226.5 million, or 24.5% of net revenues, compared to an operating profit of $217.3 million, or 21.9% of net revenues, in 2017. The segment’s quarterly performance was negatively impacted by the loss of Toys“R”Us revenues and not meeting all shipping demands late in the quarter across an expanded retail footprint. Favorable product mix coupled with lower administrative and royalty expense drove higher operating profit and operating profit margin. In the third quarter 2017, the Company had $18 million of Toys“R”Us bad debt expense.

Third quarter 2018 International segment net revenues declined 24% to $560.7 million, compared to $739.2 million in 2017. International segment revenues include a negative $30.3 million foreign exchange impact. On a regional basis, Europe net revenues decreased 29%, Latin America decreased 16% and Asia Pacific decreased 14%. Emerging markets net revenues decreased 18% in the quarter. The International segment reported an operating profit of $66.3 million compared to an operating profit of $132.0 million in 2017. Revenues and operating profits in the segment were negatively impacted by efforts to clear excess retail inventory in Europe, as well as the loss of Toys“R”Us revenues in many European and Asia Pacific markets.

Entertainment and Licensing segment net revenues increased 45% to $84.8 million compared to $58.4 million in 2017. Operating profit increased 99% to $33.7 million, or 39.7% of net revenues, compared to $16.9 million, or 28.9% of net revenues, in 2017. Entertainment and Licensing segment revenues in the quarter benefited from a multi-year digital streaming deal for Hasbro television programming and revenues from the 2017 My Little Pony: The Movie. In addition, the adoption of ASC 606 Revenue from Contracts with Customers favorably impacted the timing of revenue recognition in the quarter. Higher revenues and a favorable mix, coupled with cost reductions, drove higher operating profit and operating profit margin in the quarter.

As part of the Company’s ongoing efforts to compete in an evolving marketplace, Hasbro is undertaking organizational steps to ensure it has the right talent and capabilities to profitably grow going forward. The Company expects to incur pre-tax cash restructuring charges relating to severance and other employee costs of approximately $50 million to $60 million, that will be expensed in the fourth quarter of 2018. The Company expects cash payments to be made from October 2018 through December 2019. As a result of these steps, the Company expects to generate approximately $30 million to $40 million in annualized pre-tax savings by 2020.

Third quarter 2018 Franchise Brand revenues decreased 5% to $847.7 million. Revenue growth in MONOPOLY, PLAY-DOH, MAGIC: THE GATHERING and BABY ALIVE was offset by declines in NERF, MY LITTLE PONY and TRANSFORMERS. Both MY LITTLE PONY and TRANSFORMERS had a theatrical film in 2017. Franchise Brand revenues grew slightly in the U.S. and Canada segment and were up in the Entertainment and Licensing segment but declined in the International segment.

Partner Brand revenues declined 37% to $305.8 million. Revenue growth in BEYBLADE and MARVEL was more than offset by declines in other Partner Brands. Partner Brand revenues decreased in the U.S. and Canada and International segments.

Hasbro Gaming revenue increased slightly to $280.8 million. Continued revenue gains in DUNGEONS and DRAGONS, DUEL MASTERS, JENGA and DON’T STEP IN IT, as well as new social game launches, were partially offset by declines in PIE FACE and other gaming properties. Hasbro Gaming revenues increased in the U.S. and Canada segment but declined in the International and Entertainment and Licensing segments. Hasbro’s total gaming category was up 5% to $447.8 million, including growth in MONOPOLY and MAGIC: THE GATHERING.

Emerging Brand revenues grew 2% to $135.3 million. The category benefited from several new initiatives, including LOST KITTIES, LOCK STARS and YELLIES, as well as licensing revenues from the addition of POWER RANGERS to the portfolio. Emerging Brands revenues grew in the International segment and Entertainment and Licensing segments but declined in the U.S. and Canada segment.

Hasbro's total gaming category, including all gaming revenue, most notably MAGIC: THE GATHERING and MONOPOLY, totaled $447,844 and $964,159 for the three and nine months ended September 30, 2018, respectively, up 5% and 1%, respectively, from revenues of $424,847 and $951,397 for the three and nine months ended October 1, 2017, respectively.

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