Hasbro shares jump on overseas growth, holiday optimism
(Reuters) - Toymaker Hasbro Inc (HAS.O) topped Wall Street profit and sales estimates on Monday as strong overseas demand helped offset weakness at home, sending its shares to a new high.
Hasbro, the No. 2 U.S. toymaker, said it believes it can garner "more than its fair share" of holiday-season sales, even with a more challenging consumer environment, as it rolls out new games, focuses on brands that are selling well, and works with retailers on promotions.
Both Hasbro and larger rival Mattel Inc (MAT.O), which also beat analysts' expectations for the third quarter, are gearing up for the holidays, the biggest selling period of the year.
Shares of Hasbro, known for brands such as Monopoly, Nerf and My Little Pony, were up 6.6 percent at $50.41 after hitting a new high of $51.68. Mattel shares rose 0.5 percent to $42.91.
Hasbro should also benefit from Transformers and Spider-Man movies in 2014 and from Star Wars and Avengers movies in 2015, analysts said, as the company has toys linked to those films. Mattel has "good prospects, but it doesn't have as clearly visible a catalyst for sustained revenue growth as Hasbro has," said Needham & Co analyst Sean McGowan.
Hasbro's U.S. business is "poised for future growth" with work being done on the company's brands as well as the upcoming entertainment launches, Chief Executive Brian Goldner said during a conference call. Also, the Big Hugs Elmo toy that debuted this year is "off to a strong start," he said.
Hasbro has been trying to do a better job of managing its U.S. business. As part of that push, and the push by retailers to keep inventory in check, Hasbro's inventory at its top four U.S. retailers was down in the quarter.
Like Mattel, Hasbro was able to use strength in sales outside North America to offset weakness in the United States and Canada during the third quarter. Goldner said a 22 percent rise in sales in emerging markets such as Latin America and the Asia Pacific boosted the company's quarterly results.
Revenue rose 11 percent to $582.7 million at Hasbro's international unit, but fell 5 percent to $735.6 million in the United States and Canada.
The two toughest areas in terms of consumer sentiment continue to be Australia and the United States, Hasbro said.
Net earnings rose to $193.0 million, or $1.46 a share, from $164.9 million, or $1.24 a share, a year earlier.
Excluding a tax adjustment and restructuring and pension charges, the company earned $1.31 a share, topping analysts' average estimate of $1.29, according to Thomson Reuters I/B/E/S.
Sales rose 2 percent to $1.37 billion, beating analysts' expectations of $1.34 billion. Strength in girls' toys and in games helped offset weakness in the boys and preschool units.
Hasbro, which is in the middle of a restructuring program, cut its cost of sales by 3.1 percent in the quarter.
(Reporting by Dhanya Skariachan in New York; Additional reporting by Jessica Wohl in Chicago; Editing by Lisa Von Ahn and John Wallace)