Hasbro earnings (HAS) 4Q 2019 beat expectations, boosting shares

Earnings


Hasbro’s Star Wars The Black Series Hyperreal Episode V The Empire Strikes Back 8-Inch-Scale Darth Vader action figure.

Sarah Whitten | CNBC

Strong sales of “Star Wars” and “Frozen 2” toys helped boost Hasbro’s holiday sales during the fourth quarter, sending shares higher Tuesday.

Net income rose to $267.3 million, or $2.01 per share, in the fourth quarter ended Dec. 29, from $8.8 million, or 7 cents per share, a year earlier. Earnings in the latest period were helped by a one-time benefit of $102.5 million from gains in foreign currency hedging.

Excluding items, the company earned $1.24 per share, higher than the estimated 91 cents in a Refinitiv survey of analysts.

Net revenue rose 2.8% to $1.43 billion, but missed the estimate of $1.44 billion.

Share prices were up 4% in early trading Tuesday.

Revenue from Hasbro’s partner brands unit, which includes sales of toys based on entertainment franchises, rose nearly 50% to $408.5 million in the fourth quarter.

For the full year partner brands rose 24% to $1.22 billion. The company pointed to strong sales of “Frozen 2,” “Avengers,” “Spider-Man” and “Star Wars” lines for the increase. Hasbro currently owns the master toy license for Disney’s Marvel and Star Wars franchises as well as Frozen and Disney’s collection of princesses.

The strength of these sales is proof that Hasbro’s partnership with Disney continues to be a lucrative and stabilizing one, particularly in a post-Toys R Us world. Toymakers have had to rely more heavily on Amazon, Walmart and Target, as well as shelf space in drug and grocery stores. Retailers have seen that licensed brands can more easily draw in customers because children enjoy reenacting scenes from popular movies and TV shows.

Hasbro CEO Brian Goldner said the partnership with Disney is “very successful” and noted that “The Rise of Skywalker” and “The Mandalorian” have been big drivers of sales for the company. He said the Mandalorian Black Series figure, which is a high-end collectible with more articulation and detail than a traditional action figure, from the Disney+ show “The Mandalorian” was one of the top sellers in the fourth quarter.

“We’re incredibly excited that ‘The Mandalorian’ season two will come to Disney+ this fall,” he said during an earnings call Tuesday.

“Star Wars” The Child Talking Plush toy from Hasbro.

Hasbro

Additionally, the company is excited for the new season of “The Clone Wars” coming to Disney’s streaming service in mid-February.

The toy industry is currently facing the potential for supply interruptions from the coronavirus outbreak in China, which threatens to delay production of new toys.

“Impact to our business today is small, but it’s challenging to quantify the potential magnitude at this time, as it will depend on how long it takes to contain the outbreak,” Deb Hancock, senior vice president of investor relations for Hasbro, said. “If it takes significant period of time to control, there could be a larger impact of our business.”

Roll for initiative

The company’s games segment suffered during the fourth quarter, with revenue falling 8% to $246.4 million. While sales of Dungeons and Dragons remained strong, dwindling purchases of Pie Face and Speak Out weighed on sales.

Wizards of the Coast, which produces product for Dungeons and Dragons and Magic: The Gathering, has become a darling of the Hasbro brand. Dungeons and Dragons revenue grew for the sixth straight year and Magic revenue increased more than 30% during the year.

Hasbro has committed to investing in both brands, including developing new digital games. The Magic: The Gathering Arena game was ranked as a top esports brand and is one of the top 10 reviewed games from Metacritic.

Hasbro touted that more than 1.8 billion games have been played online so far, with exponential growth in the number of new players flocking to the product. On average, players spend about eight hours a week playing Arena.



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