Sun, Feb 10, 2019 - Page 5 News List

Toymakers diverge after Toys ‘R’ Us demise

‘SIGNS OF PROGRESS’:Mattel’s earnings beat estimates, despite the loss of Toys ‘R’ Us leading to an 8 percent drop in sales, while Hasbro failed to impress Wall Street

AP, NEW YORK

Quarterly reports from Mattel Inc and Hasbro Inc show that while the demise of Toys “R” Us has shaken up the industry, the two dominant toymakers’ paths are diverging less than a year later.

Late on Thursday, Mattel posted better-than-expected earnings per share and revenue for the key holiday quarter, sending its shares up sharply.

The maker of Barbies and Hot Wheels in April last year named a new chief executive officer and has launched a restructuring that is starting to take hold, analysts said.

For the three months that ended in December last year, Mattel swung to a profit of US$14.9 million, or US$0.04 per share, after posting a loss a year earlier.

Revenue of US$1.52 billion was down 5 percent year over year, but topped estimates.

The loss of Toys “R” Us — which liquidated its stores in the spring last year — lead to an 8 percent drop in sales, while a slowdown in China contributed to a 2 percent headwind.

Still, El Segundo, California-based Mattel reported that it achieved US$521 million in savings during the fourth quarter and expects to exceed its savings target of at least US$650 million this year.

Under its restructuring program, it is cutting 2,200 jobs worldwide, mainly office workers.

“While it’s still early days of the turnaround and there are areas to improve (Fisher Price, American Girl, etc.), we’re encouraged by the early signs of progress and think delivering above-plan cost savings should help as we enter 2019,” Citi analyst Gregory Badishkanian wrote in a note to investors.

Its stock rallied 21 percent in afternoon trading on Friday to US$15. That puts it up 50 percent in the year to date.

While Hasbro also returned to a profit in the fourth quarter, the Pawtucket, Rhode Island-based maker of Nerf and Power Rangers again missed Wall Street expectations for sales and net income, following a shortfall in the third quarter of last year.

The company earned US$8.8 million, or US$0.07 per share, for the period that ended on Dec. 30.

A year earlier it lost US$5.3 million, or US$0.04 per share. Stripping out one-time gains and costs, earnings were US$1.33 per share.

That is sharply below the US$1.68 per share that analysts polled by Zacks Investment Research expected.

Revenue dropped 13 percent to US$1.39 billion, short of the US$1.52 billion Wall Street predicted.

Hasbro was not able to recapture as much of the Toys “R” Us business during the holidays as it expected, chairman and chief executive officer Brian Goldner said in a statement.

The company was also contending with changing consumer behaviors in Europe — sales there declined 22 percent — and reduced retail inventory, he added.

Its shares slid 4.5 percent to US$86.22.

Stifel analyst Drew Crum, who has a “hold” rating on the stock, called the report “disappointing.”

“While we continue to expect growth this year, we believe downward revisions to numbers are forthcoming,” he wrote in a note.

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