* Q2 EPS $0.26; Wall Street view $0.23
* Q2 net sales up 1 percent
* Discovery tie-up to cost less than previously thought
* Still expects sales, earnings growth for the year
* Shares up 3.4 percent; Mattel shares rise 3.0 percent
(Adds more analyst comments, details, updates share move)
By Aarthi Sivaraman
NEW YORK, July 20 Hasbro Inc HAS.N posted a
higher-than-expected quarterly profit on Monday, citing strong
demand for its movie-themed toys, and said its cable TV deal
would cost it less than originally thought.
Hasbro, whose shares rose 3.4 percent, formed a joint
venture with Discovery Communications Inc (DISCA.O) earlier
this year to create a television network aimed at children.
The world's No. 2 toymaker, behind Mattel Inc MAT.N,
originally said the deal would reduce its earnings by 25 cents
to 30 cents per share in 2009 and by 30 cents to 35 cents in
2010. That forecast sent its shares down 5 percent.
Now Hasbro expects the deal to cost it only 15 cents to 20
cents per share in 2009 and 25 cents to 30 cents in 2010.
The change in forecast, despite the fact that the network
debuts in late 2010 and has not even been named, was Hasbro's
way of appeasing investors who had questioned the deal, said
Wedbush Morgan Securities analyst Chris White.
"I think the (initial) market reaction to the deal is
driving their desire to show that it's not going to be as
dilutive as they originally thought," White said.
Hasbro also forecast profit and sales growth this year.
"Investors will like the fact that the guidance is for
earnings and sales growth, in light of the fact that the
Discovery ... dilution will be less than originally thought,"
said BMO Capital Markets analyst Gerrick Johnson.
MOVIES BOOST SALES
Hasbro said second-quarter net profit rose to $39.3
million, or 26 cents a share, from $37.5 million, or 25 cents a
share, a year earlier.
Analysts' average forecast was 23 cents a share, according
to Reuters Estimates.
Sales rose 1 percent to $792.2 million. International sales
fell nearly 6 percent as the stronger U.S. dollar reduced the
value of overseas sales. Sales rose 19 percent for Hasbro's
boys' business, which includes the Transformers and G.I. Joe
This year, Hasbro has an advantage over Mattel because of a
lineup of toys tied to movies such as "Transformers - Revenge
of the Fallen" and "G.I. Joe - The Rise of the Cobra." Summer
movies tend to drive sales for corresponding toy brands -- a
lift analysts consider much-needed in the recession.
Wells Fargo Securities analyst Tim Conder said in a note
that he expects the benefit to Hasbro from movie-related toys
to continue into 2010, when the company will also have toys
tied to the "Iron Man 2" and "Toy Story 3" movies.
The boost comes as toy companies battle shrinking demand
from retailers, which are stocking fewer items in line with
weak consumer demand.
Both Hasbro and Mattel, which posted a higher-than-expected
quarterly profit last week, have trimmed costs to offset sales
Hasbro cut out nearly $13 million of expenses in areas like
advertising and administration in the second quarter, while
Mattel eliminated $91 million in similar costs.
Hasbro is launching its Littlest Pet Shop brand online in
the United States this fall and globally next spring.
Programs on the Hasbro-Discovery TV network will feature
Hasbro brands such as G.I. Joe, My Little Pony and
Transformers. The programs will also be available online.
Hasbro shares were up 87 cents at $26.25 and Mattel was up
53 cents to $17.95 in midday trade on the New York Stock
(Reporting by Aarthi Sivaraman; Editing by Gerald E. McCormick
and John Wallace)