3rd Quarter Hasbro Profits

[Jedieb]

Here's a post I read on the SWCU mailing list:

"Hasbro said today that 3rd quarter profit would fall more than expected and it would close plants in cincinnnati, Napa and San Francisco. Third quarter earnings would drop to about 32 cents a share from 43 cents a share a year earlier.

It also said it would consolidate its US Toy group in Rhode Island, which together with other job losses means about 550 jobs will go, or 5% of its workforce.

The major factors to hurt hasbro has been waning demand for star wars and pokemon toys, a shortage of electronic components and the impact of the strong USD.

Hasbro's shares fell 13 cents yesterday to close at 11 5/8, after a delayed opening they finally opened at 9 3/4 and within the hour had fallen to 9 1/16.

for the year to date, hasbros shares have fallen 51%, i bet Lucas wishes he had got cash out of them now."


Around the time of TPM's release Hasbro stock was trading at around $34 bucks. As the SW sales slowed down during the fall and winter of 99 the stock started to drop but robust sales of Pokemon and acquisitions like Wizards kept the slide in check. But now that Pokemon has cooled off the stock has apparently bottomed out at around $10-11. This is actually a pretty good time to buy, but you know the people who bought Hasbro at $34 are taking a bath right now. I wonder if certain people on this board are still stubborn enough to think SW toys were meeting sales expectations during the 99 X-Mas season and the spring of 00?

[Jedieb]

Here's a report from www.motleyfool.com


Hasbro cuts profit forecast, slashes work force

Reuters By Tim McLaughlin BOSTON, Oct 12 (Reuters) - Hasbro Inc. (NYSE: HAS), the No. 2U.S. toy maker, on Thursday cut its third-quarter earningsforecast by a third and said it was slashing its work force byabout 5 percent in the face of softening demand for Pokemon andStar Wars toys. Pawtucket, R.I.-based Hasbro, which also makes G.I. Joetoys and the board game Monopoly, plans to cut 500 to 550 jobsand close offices in three cities. The company said it wouldtake a pretax charge of $70 million for severance payments andlease terminations, primarily in the fourth quarter. Hasbro, the latest in a long line of prominent U.S.companies to forecast disappointing profits, said it nowexpects third-quarter earnings of 6 to 10 cents a share beforeunusual charges. Analysts' consensus forecast is 32 cents ashare, according to First Call/Thomson Financial. Hasbro earned43 cents a share in the 1999 third quarter. "We're probably looking at a several hundred million dollardrop in revenues for the full year," Hasbro President AlVerrecchia told analysts in a conference call. Hasbro reportedrevenue of $4.2 billion in 1999. Shares of Hasbro fell 13.4 percent, closing at $10-1/16 ona broad market sell-off. Earlier, the shares tumbled to$9-1/16, a new 52-week low. "I don't think the (restructuring) moves were surprising,"said Gerard Klauer Mattison & Co. analyst Melissa Williams."But the shortfall in revenue and earnings was more dramaticthan what we were expecting." Hasbro Chairman Alan Hassenfeld told analysts the companywill reduce its reliance on hot-selling licensed properties andwill move more engineering and design operations to Asia. "We are positioning Hasbro so that our bottom line is notdependent on the success of a blockbuster movie," he said."We're always thrilled with the prospect, but we will not counton it." Hassenfeld also said, "There could be some licenses we docancel." He declined to give specifics. Hasbro said it would close its offices in Cincinnati, Ohio,and Napa and San Francisco, Calif., to reduce overhead costs. Hasbro executives said they plan to reassess the company's2001 product line, which could result in pretax charges of up$100 million. The restructuring is expected to begin generatingsavings in 2001, the company said. Hasbro said it would explore strategic alternatives for itsdisappointing interactive business. Revenue from Star Wars toysare expected to be "minimal" in 2000, the company said. Demandfor Pokemon toys remains strong internationally but soft in theUnited States, it said. The company also blamed high oil prices, a continuingshortage of electronic components, and the strong U.S. dollarfor its lackluster third-quarter performance. It cut its earnings forecast for the full year to a rangeof 40 to 50 cents per share before restructuring and othercharges. Analysts, on average, were expecting $1.04 a share,according to First Call. But Hasbro said it has strong cash flow and expects itsoperations to generate 2000 profit of $540 million to $575million before interest, taxes, depreciation and amortization. Moody's Investors Service on Thursday cut its long-term andshort-term ratings on about $1.6 billion of Hasbro debt, toBaa1 and Prime-2 from A2 and Prime-1, respectively. Hassenfeldsaid debt reduction was a company goal.

[Bromine]

Funny thing was Star Wars stuff DID move quite well, but there was just WAY too much of it.

[jjwr]

I think the toys did do well just not as well as expected. And with everyone ordering so many of them they ended up just sitting and making it look like they're doing even worse.

From everyone I've been talking to all the new Joes have been flying off the shelves everywhere they've been spotted, I bet if they put more money into this and do a full scale re-launch(along with advertising, maybe a comic/cartoon to draw the kids in) then they'd make a truck load of money off Joe again.

[Jedieb]

Hasbro did sell tons of SW toys, but they didn't sell nearly enough of them. They didn't meet their sales forecasts and retailers made the same mistake. I don't think ANY line could have lived up to those kind of expectations. It's as if they tried to redefine the number of toys a movie could sell and it never happened. Take jjwr's G.I. Joes. If those figures had been released in the same numbers that EP1 toys had been sold they'd be sitting on shelves gathering dust right now too. You can say the same for some of the hottest lines out right now (Gundam & The Simpsons come to mind).

It looks as though retailers and Hasbro have learned their lesson. From what I've seen POTJ shipments are much more realistic and you're not seeing the huge bottleneck of toys that you saw with EP1. Make no mistake, the big winners of the first half of 99 were SW and Pokemon, but even though SW may have outsold all other toy lines, Hasbro had so much unsold product on their hands that the line suffered. I just hope we don't see the same mistake with EP2.

[Bromine]

Maybe they figured Star Wars would be as big as Pokemon. That's just a guess, but I think it makes sense.
Unfortunately, it's a completely different market and perhaps Hasbro didn't realise that. Pokemon is targeted at young kids who will see something with Pokemon on it, want it immediately, then bug their parents for it. While Star Wars has little kids as part of their market share, a lot of its market is made up of slightly older youths right up to guys like us. These consumers aren't always going to see a piece of crap with the Star Wars logo and buy it on impulse; they're old enough to know the value of a dollar. Instead of buying it, they're going to say, "I'm not paying three bucks for an electronic lollipop!"
Essentially what I'm trying to say is that while the Pokemon line could include absolute crap, the Star Wars line needs to focus more on quality merchandise due to a more discerning consumer. I think Hasbro missed that.